72t monthly payments
Client calculated annual 72t payments with amortization method ($9,598 per year). They started taking monthly payments in February of 2020, however, a monthly distribution was not factored into the original calculation. They instead just divided the annual amount by 11 (months remaining in the first calendar year) to arrive at a monthly payment of $872.54. If they continue to take the same monthly amounts in 2022, the total amount paid in the 2022 calendar year will exceed the annual amount (since monthly amount was initially calculated based on 11 months instead of 12). Should they change their monthly distribution amounts to be the annual amount divided by 12 (to keep the annual distribution amount the same) or will the change in monthly distribution amount be considered a modification to the plan?
Permalink Submitted by Alan - IRA critic on Tue, 2022-01-04 00:54
The only requirement is to distribute exactly 9598 in 2022. There are several ways to do that as to how and when the installments are adjusted. The only error that would bust the plan is missing the annual total that the 1099R would expose. Monthly distributions may too frequent, but whatever the frequency of distributions, they should not be scheduled for very early or very late in any month, since any problem with the Dec distribution leaves no time to correct it.