Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

How this exception works ...................................................................................................431 Notice 89-25 (A-12) and its successor, Rev. Rul. 2002-62 ...............................................432 Steps required to initiate a SOSEPP ...................................................................................432 The three methods: RMD, amortization, annuitization .....................................................432 Variations on the three methods ..........................................................................................433 Choose single or joint life expectancy ................................................................................433 Notes on Joint and Survivor Life Table ..............................................................................434 Notes on Single, Uniform Lifetime Tables ........................................................................434 What interest rate assumption is used .................................................................................434 What account balance is used..............................................................................................435 Applying the SOSEPP exception to multiple IRAs ...........................................................435 Starting a second series to run concurrently .......................................................................436 Procedural and reporting requirements ...............................................................................436 9.3 M ODIFYING THE SOSEPP........................................................................................................436 Effects of a forbidden modification of series .....................................................................436 When the no-modification period begins and ends............................................................436 Exceptions for death or disability........................................................................................437 Changing to RMD method after the SOSEPP commences ...............................................437 When taking an extra payment is not a modification.........................................................437 What other changes do NOT constitute a modification? ...................................................437 What changes DO constitute a modification? ....................................................................438 Effect of divorce on the SOSEPP........................................................................................439 Transfers to, from, or among IRAs supporting a SOSEPP ...............................................439 9.4 O THER E XCEPTIONS TO THE P ENALTY ....................................................................................440 Death benefits .......................................................................................................................441 Distributions attributable to total disability ........................................................................441 Distributions for deductible medical expenses...................................................................441 QRPs, 403(b) plans: Early retirement .................................................................................442 QRPs, 403(b) plans: QDRO distributions ..........................................................................442 ESOPs only: Dividends on employer stock........................................................................442 IRAs only: Unemployed’s health insurance .......................................................................442 IRAs only: Expenses of higher education ..........................................................................442 IRAs only: First-time home purchase .................................................................................443 IRS levy on the account .......................................................................................................444 Return of certain contributions............................................................................................444 Qualified reservist distributions ..........................................................................................444 Exceptions for tax-favored disasters ...................................................................................444 CHAPTER 10: MINIMUM DISTRIBUTION RULES FOR DEFINED BENEFIT PLANS AND ANNUITIZED IRAS........................................................................................................................445 10.1 T ERMINOLOGY Y OU M UST K NOW ..........................................................................................445 Annuity, deferred and immediate ......................................................................................445 Meaning of “annuitize” ......................................................................................................446