Pension & Excise Tax Planner
Top 12 Questions List

#1
Q: How do I enter distributions in a form other than dollar amounts?
A: Except for required minimum distributions (which are handled automatically based on your entries at the Fund Information screen), distributions are entered at the Desired Pension Distributions screen which is selected from the Inputs Menu. With the cursor in any one of the alternative columns, press F1 to see the available choices such as Threshold, Grandfathered Amount, Lump Sum, etc. Any of these choices may be used for some years in combination with dollar amounts entered for other years. You may also select these choices from a menu using the Data Entry Assistant which is on the Edit Menu.

#2
Q: How do I enter information at the multiple year inputs efficiently?
A: Use the Data Entry Assistant on the Edit Menu. Alternatively, use the Replicate Value (or F5) or Copy Column (or F4) choices on the Edit Menu.

#3
Q: How do I enter separate income tax rates for the Income Tax on Pension Fund, Income Tax on Distributions and Income Tax on Personal Fund Growth?
A: At the Edit Menu, select Calculation Assumptions, answer No to Use a Single Income Tax Rate for All Calculations, select Save at the bottom of the Calculations Assumptions window. Then proceed to the Inputs Menu where input screens will be found for Income Taxes on Distributions & Growth and for Estate Tax & Inc. Tax on Pension Fund. When Use a Single Income Tax Rate is answered Yes (the default), the program will use the same income tax rate for all three purposes and no input screen for additional sets of rates will be displayed on the Inputs Menu.

#4
Q: How do I determine whether distributions during the three year window are worthwhile?
A: The Distributions Analyzer feature, which is available on the Edit Menu, is aimed at the three year window issue (the period through 1999 during which there is no excess distributions tax). When you use this feature, you select an Alternative on which the analysis will be based. Then you select a target year for the analysis (it defaults to 30 years). The program then calculates three values: a maximum deferral case (your selected alternative with minimum distributions only), a 1999 distribution which zeros out the excess distributions tax over the period, and a 1999 distribution which zeros out the excess accumulations tax over the period. The minimum distributions only case displays the years in which it is the best result (i.e., has the highest Net to Family value). You have the option of transferring any or all of the calculated values to the Alternatives columns. This would then allow you to use the Net to Family Graph and the Net to Family Comparison calculation report to view the results and observe the crossover point, if there is one. It is recommended you enter Taxable Estate values before using the Distributions Analyzer (see the following Question #5). (Also, see the discussion of the Distributions Analyzer later in this manual under Edit Menu.)

#5
Q: What is the benefit of using the Taxable Estate inputs and what should I enter?
A: You will get a much more precise analysis if you use the Taxable Estate inputs. This is particularly true if you are looking at the issue of making distributions during the three year window. When you enter Taxable Estate values, the program then does a precise §691(c) calculation where the estate tax deduction is computed by looking at the Taxable Estate with the Pension Fund and then without the Pension Fund. Then this deduction is used dollar-for-dollar until used up with the income tax rate applied to the remaining balances to arrive at the Income Tax on Pension Fund in the Estate Analysis. If you do not enter the Taxable Estate, this calculation is based on the entered marginal estate tax rate (thus overstating the deduction) and is then applied on any annuity basis to remaining distributions. When you enter the Taxable Estate, the program no longer uses the entered estate tax rate inputs. The Taxable Estate you enter is for the Taxable Estate of the second-to-die in the Spousal beneficiary case. Therefore, you should reflect any reduction in the Taxable Estate due to the use of the $600,000 equivalent exemption if it is used to pass property to someone other than the spouse. It is reasonable for the Taxable Estate to be less than the Pension Fund Balance in appropriate cases.

#7
Q: How is the Inflation Rate input on the Fund Information screen used?
A: It is used for two purposes. First, it is the rate used when you want to adjust results for inflation (see the preceding Question #6). It is also used when Treatment of Deferred Income Tax on Pension is set to Present Value at the Calculation Assumptions screen (available on the Edit Menu). When a term certain method is being used and the Present Value selection has been made (this is the default selection), the Income Tax on Pension Fund value on the Estate Analysis report uses the Inflation Rate to compute a Present value of the income tax deferred due to use of term certain method.

#8
Q: How do I change underlying program Calculation Assumptions?
A: This may be done by selecting Calculation Assumptions on the Edit Menu. It is necessary to select Save before exiting the window for changes to be made. This is a powerful feature and potentially dangerous feature in that most changes here have a significant effect on calculations. We recommend use of the defaults in most cases.

#9
Q: Is there a way to change the Alternative for the calculation displayed in the bottom half of the screen?
A: Yes, click on the Alternative # at the top of each column on the Fund Information screen. Also, you may select Configure Screen at the Options Menu. Or, you may press the Alt key and the number of the Alternative while at any input screen.

#10
Q: Should I always enter a value for the Retirement Year input on the Fund Information screen?
A: No, this input should generally be left blank. It should be entered when you have a client who is no more than a 5% owner of a company with a pension plan that is not an IRA where the client is not retired by the age 70½ year. It also may be used for some TEFRA cases where you just want to delay the required beginning date beyond the age 70½ year.

#11
Q: How do I print an input sheet for the Pre-59½ Distributions Worksheet?
A: Select Print on the File Menu (or press F6) and enter Yes in the Include? column for Pre-59½ Distributions Report. This will print both the calculation report and the related inputs report.

#12
Q: What value should be entered at the Personal Fund Balance input on the Fund Information screen?
A: In most cases, this input should be zero. It is not recommended for use as a way of modeling other estate assets. Personal Funds are meant to be those funds taken out of the Pension Fund. Even in the case of existing Personal Funds, their existence has little relevance to analysis focused on the future.

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