Life and Death Planning for Retirement Benefits

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36 Life and Death Planning for Retirement Benefits
Last Survivor Table. The Uniform Lifetime Table is found at Reg. A-
2, and in of this book (p. . The Joint and Last Survivor Table is found at Reg.
A-3 (not reproduced in this book).
Post-death RMDs based on the life expectancy of the surviving spouse C), (D));
of a nonspouse Designated Beneficiary (¶ 1.5.05); or of the deceased participant ; are
calculated using the Single Life Table. The only post-death RMDs not governed by the Single Life
Table are the RMD for the year of the participant’s death A)) and distributions under the
5-year rule . The Single Life Table is found at Reg. A-1, and i
of this book (p. .
The IRS uses a different set of actuarial tables for estate and gift tax valuations; see
The estate and gift tax actuarial tables must be updated at least every 10 years. The
2009 updates to the transfer tax actuarial tables have no effect on the calculation of RMDs. The
tables used to calculate RMDs were last updated in 2002. T.D. 8987, 67 FR 18987. They may be
updated from time to time by the IRS. Reg. A-4.
1.2.04 What is a person’s “age” for RMD purposes?
To obtain the ADP or divisor from the IRS tables, you need to know the
participant’s or beneficiary’s age. Age for RMD purposes means the age the person will attain on
his birthday in the applicable Distribution Year; it is the age he will be at the end of the Distribution
Year. Reg. A-4(a), (b); A-5(c).
The tricky part is that for some RMDs the age is determined only once, at the beginning of
the payout period; this is called the “fixed-term” or “reduce-by-one” method. For other RMDs, the
age is redetermined annually (“recalculation method”). The participant or beneficiary has no
choice in this matter—the regulations dictate which method applies in which situation.
A. Recalculation method. The recalculation method applies for purposes of computing all
lifetime RMDs (¶ 1.3), including the RMD for the year of the participant’s death if any
A)), and post-death RMDs when the surviving spouse is the sole beneficiary
D)). Under the recalculation method, the individual’s age is redetermined each year,
and the ADP used is the divisor applicable to the new age, instead of just deducting one
from last year’s divisor. Under the recalculation method, life expectancy never runs out as
long as the distributee is alive: See “Kenny Example” and “Josephine
Example” D)).
B. Fixed-term method. Under the “fixed-term method,” you determine the person’s age and
the corresponding ADP in the first Distribution Year. In subsequent Distribution Years, the
divisor is simply the prior year’s divisor reduced by one; see Diane Example at ¶ 1.5.05(A).
Some call this the “reduce-by-one method.” Unlike with the recalculation method, you
do not determine a new ADP each year based on the person’s new age. With two
exceptions, the fixed-term method is always used after the participant’s death to determine
RMDs to the beneficiary. The two exceptions are: the RMD for the year of the participant’s
death A)); and RMDs during the surviving spouse’s life, if she is the participant’s
sole beneficiary D)). The fixed-term method is never used to calculate RMDs
during the participant’s lifetime.