Modifications to Substantially Equal Periodic Payments

[Felicia]

Section 72(t) permits a modification to SEPPs prior to the later of 59-1/2 or 5 years for reason of death or disability.

If a participant takes a distribution on account of disability, do SEPPs continue? If they continue, do they continue at the same amount as before the disability distribution (assuming that the SEPP was based on the amoritization or annuitization method)?

Or, should SEPPS be discontinued?

Or?

[Mary Kay Foss]

The SEPP payments can be stopped when the owner becomes disabled. The individual must meet the IRS definition of disability in Section 72 which is more onerous standard than a disabilty policy or Social Security disability.

If additional payments are needed after the SEPP stops, there is no 10% penalty and no prescribed timing.

[Kirk Maldonado]

Mary Kay Foss:

Are you aware of the fact that there are (at least) three different definitions of disability contained in the Social Security Act?