June 8, 1989
TO: PENSION MEMBERS NO. 27-89
RE: PRIVATE LETTER RULINGS CONCERNING "SUBSTANTIALLY EQUAL
PERIODIC PAYMENTS"
__________________________________________________________
In Notice 89-25, the IRS set forth three alternative
methods of computing the "series of substantially equal periodic
payments" from an IRA or individual account plan exempt from the
section 72(t) tax on early distributions under section
72(t)(2)(A)(iv). (See Institute Memorandum to Pension Members
No. 21-89, dated March 27, 1989.) One of these methods involves
the amortization of the account balance over the life expectancy
of the participant or the joint life and last survivor expectancy
of the participant and the beneficiary at an interest rate not
exceeding a reasonable rate on the date payments commence.
Attached are copies of five recent private letter rulings
approving the use of a variety of different interest rates in
this calculation. In these letter rulings, the taxpayers
proposed the use of (1) the interest rate specified in section
2619.41 of the Pension Benefit Guaranty Corporation regulations,
Appendix B; (2) the federal long-term rate; (3) the average of
the Adjusted Federal Long Term Rates used for purposes of section
382 of the Code for the prior 12 months; (4) an assumed rate of 9
percent; and (5) the Long-Term Federal Rate used for purposes of
section 1288(b) of the Code.
We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachments