For clarity, I do not know all of your specifics - type of retirement plan / age of the worker, etc. but will be glad to offer information for you to read and hopefully, understand. I try to find knowledgeable sources that offer explanation in as clear as language as possible. I am also retired now so I don't have to keep up with a lot of changes but I think I know the changes that your Accountant referenced. I am not sure either will affect you since you are just beginning the process. You seem to want to use the Rule just as it was intended - that is to say, the Substantially Equal Periodic Payments (SEPP).
READ THIS: Great Article and current.
Investopedia (updated Jan 20, 2021) Learn the Rules of Substantially Equal Periodic Payment (SEPP)
Remember the avoidance of the 10% early distribution penalty on early withdrawals under this method or the other one (Rule of 55) is dependent upon following the rules SPECIFICALLY -
A few of them are:
- Your husband has to leave the job where the retirement funds will be distributed; if that is where they are.
- There is no changing the amount that is calculated except for death and I think disability
- no modifications except as was put in place by the SECURE ACT (see below) but that is already in place now so your amount would be figured under the new life expectancy table
The changes which I am aware to the SEPP in Tax Year 2020 are:
1. The SECURE Act, passed in December 2019, made changes to the life expectancy tables to account for increases in life expectancies across the board. As a result, if either the fixed amortization or annuitization methods were used, the annual amount can be recalculated once using the new tables without the update being treated as a modification for the SEPP program. This change has the potential to lower the annual amount required under these two methods.
2. On March 27, 2020, President Trump signed a $2 trillion coronavirus emergency stimulus bill. It allowed those affected by the coronavirus situation a hardship distribution of up to $100,000 without the 10% penalty those younger than 59½ normally owe. Account owners also have three years to pay the tax owed on withdrawals, instead of owing it in the current year. Or, they can repay the withdrawal to a 401(k) or IRA plan and avoid owing any tax; even if the amount exceeds the annual contribution limit for that type of account. (This is called a Coronavirus Distribution)
Another good link on this part (#2):
The Street: 08/19/2020 - Don’t Qualify for a Coronavirus-Related Distribution? There’s Always 72(t)
I am not sure that #2 is what you wanted to do - it is more of a loan than an actual distribution. But the decision is up to you - rather your hubby, the owner of the retirement plan. If he is unsure if he is gonna leave or stay with the employer - this one will be a bad option if he leaves the employer because any loan from an employer deferred retirement plan is due in full or if not repaid immediately everything comes due - taxes on the (loaned) amount + (if less than 59-1/2 years old), the 10% penalty.
Your hubby's decision whether to stay or go from the employer is paramount in the decision to do any of these things - loan or SEPP - He has to make that decision.
Hope this helps with the understanding. The above links will probably be easier for you to read but if you want it from the IRS - here it is:
THE IRS JARGON IRS Notice 2020-50 - Guidance for Coronavirus-Related Distributions and Loans from Re...
Section 72(t)(1) imposes an additional tax on early distributions from eligible retirement plans (other than governmental § 457(b) plans, unless a distribution is attributable to an amount that was transferred to the § 457(b) plan from a plan that was subject to § 72(t)). In general, this additional tax is equal to 10% of the portion of the distribution that is includible in income. For any amount distributed from a SIMPLE IRA during the 2-year period described in § 72(t)(6), the rate of the additional tax is increased from 10% to 25%. Section 72(t)(2) provides a number of exceptions to this additional tax, including, for example,
- exceptions for distributions made on or after the employee attains age 59½,
- distributions made to a beneficiary on or after the employee’s death,
- distributions made because of the employee’s disability,
- and distributions that are part of substantially equal periodic payments made over the employee’s life or life expectancy
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