Annuitization Method ( or Fixed annuitization method)
Definition
One of the methods used to calculate substantially equal periodic payments (SEPP), also referred to as 72(t) payments. Under the fixed annuitization method, the annual payment for each year is determined by dividing the account balance by an annuity factor that is the present value of an annuity of $1 per year beginning at the taxpayer's age and continuing for the life of the taxpayer (or the joint lives of the individual and beneficiary).
The annuity factor is derived using the mortality table in Appendix B of Revenue Ruling 200262, and using the chosen interest rate. Under this method, the account balance, the annuity factor, the chosen interest rate and the resulting annual payment are determined once for the first distribution year and the annual payment is the same amount in each succeeding year.
As provided under Revenue Ruling 200262, an individual who begins distributions in a year using either the fixed amortization method or the fixed annuitization method may in any subsequent year switch to the required minimum distribution method to determine the payment for the year of the switch and all subsequent years and the change in method will not be treated as a modification within the meaning of § 72(t)(4). Once a change is made under this provision, the required minimum distribution method must be followed in all subsequent years. Any subsequent change will be a modification for purposes of § 72(t)(4).
Referring Cite
IRC § 72(t), Revenue Ruling 200262
Additional Helpful Information

Generally, the ‘fixed’ annuitization and amortization methods require the participant to distribute a fixed amount each year.

This means that the same amount must be distributed for each year of the duration of the SEPP. However, the IRS granted exceptions to three taxpayers, allowing them to recalculate the amount each year. PLRs 200432021, 200432031, 200432024. Note: A PLR cannot be cited as precedence or used as legal reference, and can be relied on only by the individual to whom it was issued.