How does one determine whether to treat a component as a lumped or distributed one? The answer is, that if the the element size is greater than lambda/20, where lambda is the effective wavelength of the signal associated with the element, then it should be treated as a distributed component or element. This means that for typical discrete designs, the lumped approximations are valid for frequencies in the 500 to 1000 Mhz range. For ICs the frequency range is much larger because of the small size of the elements encountered there. This range may be up to 10 Ghz. One has to ask, where did the 5% of lambda come from? It is like most other things in practical engineering an approximation and a thumb rule. It should be considered a guideline. A distributed model is usually more accurate for any frequency above DC but experience says that the 5% guideline is a good transition value. Note: The effective lambda is the lambda in free space divided by the square root of the effective dielectric constant. The effective dielectric constant in homogeneous media is simply the relative permittivity. For non-homogeneous media is not. Usually for non-homogeneous systems such as microstrip the effective dielectric constant is less than the relative permittivity.