section 1 - The American College Online Learning Center

8. Calculating required distributions is different for benefits that are currently annuitizedand those that are not currently annuitized.a. Account plansb. Annuities(1) Any benefit that has not been annuitized by the RBD (required beginningdate)(2) Includes deferred annuities (that have not been annuitized)(1) Elect an annuity form of payment.(2) Purchase an immediate annuity.9. RMD account calculation rule10. Example:a. Divide the account balance from the previous year by the life expectancy usingthe uniform lifetime table, which is a table established by the IRS.b. The distribution is based on participant’s age at end of distribution year.c. During the lifetime, the choice of beneficiary does not affect the calculation.(Planners should use the uniform table.)d. A spousal exception applies to the case of the uniform table:(1) When the spouse is more than 10 years younger…(2) Use the actual joint life expectancy to determine the amount that needs tobe withdrawn. This will result in a smaller required distribution.a. Sally, an IRA participant, is aged 71 on the last day of the first distribution year.Her 30-year-old niece is the beneficiary. The IRA balance end of preceding yearis $200,000.(1) First year RMD is $200,000/26.5 = $7,547(2) Second year RMD is calculated with 25.6 life expectancy (72-year-oldparticipant)b. Sally’s beneficiary was her 51-year-old spouse(1) RMD is $200,000/34.2 = $5,848(2) RMD for second year use 33.2 life expectancy (joint life expectancycalculated at the end of that distribution year)11. RMD Annuity calculation rulea. Compliance only has to be demonstrated once!b. Life, joint and survivor, and even variable annuities typically satisfy the rules.c. Rules if the annuity is purchased after the required beginning date (RBD):(1) The annuity purchased after the RBD must satisfy the account rules inthe year of the purchase. For example, if the annuity payment is smallerthan the amount required under the account rules, the client must makeup the difference.(2) Annuities are not aggregated with account plans. For example, an annuitypayment from one IRA does not reduce the RMD requirements for otheraccount plans.12. Common errors that occur under the RMD rules during the life of the participant4.13