The performance of correlated ab initio methods and DFT methods was compared for the propagation and chain transfer steps of ethylene polymerization by a model aluminum–amidinate system, [{HC(NH)2}AlCH2CH3]+. All methods agree that the main chain transfer mechanism is β‐hydrogen transfer to the monomer (BHT), and that this is substantially easier than propagation; implications for the real Jordan system are discussed briefly. Counterpoise corrections are necessary to obtain reasonable olefin complexation energies. Activation energies are consistently lower at DFT (BP86, B3LYP) than at ab initio levels [MP2, MP3, MP4, CI, CCSD(T)]; the differences are particularly large (16 kcal/mol) for the BHT reaction. This is suggested to be related to the known problem of DFT in describing hydrogen bridged systems. © 2000 John Wiley & Sons, Inc. J Comput Chem 21: 398–410, 2000