Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

tables for calculating his SOSEPP: the Single Life Table, the Joint and Survivor Life Table, or the Uniform Lifetime Table. Rev. Rul. 2002-62, § 2.01(a), (b), § 2.02(a). The Single and Joint and Survivor Life Tables are contained in Reg. § 1.401(a)(9)-9 , A-1, A-3. The Uniform Lifetime Table (showing the joint and survivor life expectancy of the participant and a hypothetical beneficiary who is 10 years younger than the participant) i s contained in Appendix A of Rev. Rul. 2002-62 and of this book (Table 2). It is an expanded version of the Uniform Lifetime Table contained in Reg. § 1.401(a)(9)-9 , A-2, extended down to age 10! B. Only two choices for annuitization? For an annuitization-method SOSEPP, the annuity period is “the life of the taxpayer (or the joint lives of the individual and beneficiary).” Notice 89-25 permitted use of any “reasonable mortality table” under the annuitization method. Rev. Rul. 2002-62 took away that option, and supplies its own table of mortality factors that must be used in determining payments under the annuitization method. Rev. Rul. 2002-62, § 2.02(a). If the participant elects the Joint and Survivor Life Table, then the factor used to determine the first payment in the series is based on the joint life expectancy of the participant and his ACTUAL beneficiary. Rev. Rul. 2002-62, § 2.02(b). If the participant is using the RMD method ( ¶ 9.2.05 (A)), then the beneficiary (for purposes of determining the factor under the Table) is redetermined every year, as of January 1 of the distribution year, using the same rules as apply for determining the beneficiary for minimum distribution purposes (see ¶ 1.3.03 (B)). Under the annuitization or amortization method, subsequent changes of beneficiary will have no effect on the payments so long as the participant continues using that method—but if he switches in mid-stream to the RMD method ( ¶ 9.3.04 ), and is required (or chooses) to continue using the Joint and Survivor Life Table, then his subsequent payments would be determined using the joint life expectancy of himself and his actual beneficiary. The only difference between the Single Life Table and the Uniform Lifetime Table is the size of the annual payment relative to the size of the account. A participant who wants larger payments would choose the Single Life Table. A participant who wants smaller payments would use the Uniform Lifetime Table. When using the “separate IRA” SOSEPP recommended at ¶ 9.2.04 , the Single Life Table should always be used, to generate the largest possible payment s relative to the account size. With both these tables, you find the appropriate factor for the first year’s payment based on the participant’s age on his birthday in that year. Rev. Rul. 2002-62, § 2.02(a). If using the RMD method, you then go back to the originally-chosen table every year to get that year’s factor, based on the participant’s new age. If using the amortization or annuitization method, you don’t go back to the table every year because the payments are fixed in amount (unless your series design is based on annual recalculation; see ¶ 9.2.06 ). Notes on Joint and Survivor Life Table Notes on Single, Uniform Lifetime Tables

What interest rate assumption is used

For the amortization and annuitization methods, it is necessary to choose an interest rate (representing the hypothetical projected investment return on the account during the period of the