RMD in DB using Annuity method

[himt4]

All the prior DB RMDs I calculated were done using the account balance method. I have some questions about the annuity method. I'd like to keep this simple at the start and get more complex with follow-up questions (though it always seems impossible to keep these discussions simple).

Lets say....

An owner turns 70.5 in 2006, and must take his RMD by 4/1/07. He doesn't want to deal with monthly annoyances, so he wants his RMD to be taken annually. So, it's my understanding that he can calculate his vested monthly accrued benefit, multiply it by 12, and distribute this before 4/1/07.

Before getting into issues of being allowed to convert that accrued benefit into alternate forms,

Here's my first question: as of what date do I calculate the vested monthly accrued benefit? is it 4/1/07, 12/31/06, or 12/31/05?

[Belgarath]

See 1.401(a)(9)-6, Q&A-1, ©(1) last sentence.

[himt4]

That last sentence would be...

"All benefit accruals as of the last day of the first distribution calendar year must be included in the calculation of the amount of annuity payments for payment intervals ending on or after the employee's required beginning date."

So, in my example, this would translate to:

"All benefit accruals as of the last day of 2006 must be included in the calculation of the amount of annuity payments for payment intervals ending on or after 4/1/07"

So, the answer is I calculate the monthly accrued benefit as of 12/31/06.

Ok. let me just fine tune for the vesting issue, just to be certain. When it says "benefit accrual" is it also taking into consideration vesting? If the 12/31/06 monthly accrued benefit is 1000, but the guy is only 20% vested as of 12/31/06, is his RMD 1000 X 20% X 12 = 2400?

[Effen]

Yes, it only applies to the vested benefit, but be careful that the doc doesn't grant full vesting at age 65 (or some other age) regardless of YOS.

[himt4]

OK, Thank you. (I'll continue my thread here, but I'm also going to start a new one called "starting a new DB plan for a post 70.5er", watch for it)

Now to get more complicated with this thread...

Its my understanding that to get the $2400 RMD used in my example even smaller, I can convert it to a 100% joint and Survivor form of payment. So I would take the actuarial equivanlent of this 2400 Life Annuity and convert it to 100% joint and Survivor using the Plan's interest and mortality and perhaps get a much lower number like $1963 as my RMD. Is this logic correct? any problems doing this? are there other ways to get the RMD smaller like this?