Can IRA custodians (annuity companies) restrict RMDs?
Good morning,
Although the vast majority of IRA annuity contracts allow for 10% penalty free withdraws of the account balance and/or an exception to penalties for RMDs, there seems to still be some contracts that apply surrender charges to RMDs. Has the IRS, legislation or courts addressed this or is it possible for custodians to disregard RMDs when applying notable surrender charges? I could not find any definitive regs on the matter and would appreciate any insight.
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2024-11-19 15:29
I know of no tax code rule that requires surrender charges to be waived, or CD early withdrawal penalties to be waived if they are RMDs, even though not waiving them seems harsh and adverse to consumers. Actually, since most IRA owners probably do not apply all their IRA funds to annuities or CDs, perhaps these insurance companies and banks hope that the IRA owner decides to complete their RMD from other IRA holdings.