72(t) Payouts and RMD Tables
National Underwriter (Life/Health) (05/14/01) Vol. 105, No. 20 p.18; Caudill, April

While it is known that new required minimum distribution (RMD) regulations will greatly impact 72(t) calculations, the question that remains unanswered is how much. Under the 1989 guidance (Notice 89-25, 1989-1 CB 662), the Internal Revenue Service (IRS) lists three safe harbor methods for calculating a series of substantially equal periodic payments. They include the RMD method, the amortization method, and the annuity method. Of the three, two rely on the RMD calculation. Just how much the regulations will affect these calculations remains uncertain, although some industry experts have their own theories. Marjorie Hoffman, Senior Technical Reviewer for the Chief Counsel, Employee Benefits & Exempt Organizations at the IRS, has commented that 72(t) calculations should be made under the old regulations. Other industry members believe the answer may rest in the phrasing of the RMD method, which reveals that the requirements for the 72(t) exception will be met if the annual payment is determined using "a method that would be acceptable for purposes of calculating the minimum distribution required under section 401(a)(9)."


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