Roth conversions on annuities with benefit riders
Can you provide a link or insight on how companies are required to calculate tax liability (1099s) on roth conversions of annuities with benefit riders? Are the calculations the same for DB riders as they are for income riders?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2024-10-31 17:48
There are 3 methods that the insurance company can use to determine the fair market value of the IRA annuity at the time of a conversion. Even if it is known which method will be used, it will probably be difficult for the IRA owner to calculate the amount on their own. Therefore, the IRA owner should ask for a quote on the FMV before converting to avoid surprises.
These 3 methods are summarized in IRS Reg. 1.408A-4, QA 14.
It is interesting to note that the value of a conversion will usually be higher than the amount used to determine an RMD from the IRA annuity because the RMD fair market value can exclude certain fringe benefits.