Submitted by Alan Spross on Fri, 2008-11-14 21:20

Denise, thanks much for posting this article, as there have been many questions posted here on this very topic. I have been assuming this to be the case despite lack of clarity in the IRS Release of RMD Rules for DB Plans and Annuities released in 2004. It seems like a basic issue that should have been addressed.

Therefore, it is a relief to see Natalie arrive at the same conclusion. It appears that whether a separate IRA annuity is created or an immediate annuity is purchased in a custodial account payable into the IRA, there is no difference in treatment for RMD purposes.



Submitted by Denise Appleby on Sat, 2008-11-15 03:37

You’re welcome Alan.

It does appears so. Hopefully the final regs are issued soon.



Submitted by Al Fry on Sun, 2008-11-16 02:44

I think the difference is that my annuity payments, even though guaranteed for life are actually withdrawals until age 100 for IRAs, which is the time at which I no longer have an account balance that I can access. The payments are calculated as if it were regular annuitization. I can see this would not apply to other SPIAs. For NQ, they are regular annuity payments with access to an account balance.



Submitted by Alan Spross on Sun, 2008-11-16 06:22

Al,
Does your account balance drop each 12/31 by the amount of the annuity payments you (or your IRA) received for prior 12 months?



Submitted by Al Fry on Sun, 2008-11-16 16:59

Alan – It all depends on the market, since it is a VA. It does have a 75% floor on the payments, even if account balance drops to zero. It is a strange form of annuitization. If the account balance goes up, the payments increase. The company guarantees the payments will meet or exceed RMDs.



Submitted by charles lore on Tue, 2008-11-18 01:21

Before reading Natalie’s explanations I attempted to answer her questions myself and I nailed all of them. If I had tried answering them a month ago before I joined this forum I would of had them all wrong. Allan has answered a few postings on annuities that have been dead right on target. and now Natalie has verified the answers to these complex questions.



Submitted by Michael McConnell on Wed, 2008-12-10 15:27

I know that on a lifetime payout annuity that is an IRA that the distributions from the annuity can only be used to satisfy rmd for this annuity, is there any exception to the rule if you have a 10 year payout annuity and the annuity distributions are or would be considerably larger than rmd amount required. In other words, is it possible to use the “excess” to help satisfy rmd for other non-anniuity IRA’s?



Submitted by Al Fry on Wed, 2008-12-10 17:05

Not according to the IRA queen. And I would never doubt her. I can do that in mine, but only because my annuity payments are made in the form of withdrawals (with an account balance) for IRAs. If my same annuity was non-qualified, my payments would be the same, however they would be true annuitization, still with an account balance. The generic term is “hybrid annuitization”; Lincoln’s name is i4LIFE sm.



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