1 time change to 72T distribution amount | Ed Slott and Company, LLC

1 time change to 72T distribution amount

In 2002, the IRS allowed for the 72T amount to be recalculated due to IRA values that had declined making it difficult to continue the same distribution rate. Is this change still allowed or was that only for the 2002 tax year that the distribution amount could be changed and not cause the 10% penalty to be triggered?

There are two ways that an annual distribution not originally using the RMD method can change: 1) A one time change to the RMD method that is allowed. This should not be attempted mid year, but should be effective on a calendar year basis. 2) ONLY if the original plan adopts a recalculation method from the beginning, the annual amount must be recalculated for each year using new ages, interest rates, and account balances. Note that 2) above cannot be adopted for a new plan year in the middle of the 72t term. THe plan must have recalculated each and every year at the same time of the year, typically effective on Jan 1. Therefore, for the vast majority the one time switch to the RMD method is the only relief available. This change is possible for any year after 2002, not just in 2002.

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