RMD calc on IRA with no cash value and just a living benefit
I used to know the answer to this, but it’s been a while since I’ve been asked:
If I write an annuity with a living benefit in an IRA, and the cash value goes to zero, but I still have the LB kicking out income, what’s the guidance on calculating the RMD?
Do we treat the IRA as if it had been annuitized, so that the LB payout becomes a “self-satisfying” RMD for that IRA and that IRA alone?
Or do we need to calculate some present value of the anticipated future income stream over the owner’s life expectancy, and use that present value to calculate an RMD using Table III?
I’m inclined to think the former vs. the latter, because what if this is the only IRA the client has? I don’t see how it would make any sense to calculate an RMD that is more than the LB payout if the client has no other qualified account to draw from?
Like I said, it’s been a while. Plz and thx.
Permalink Submitted by Alan - IRA critic on Tue, 2021-11-02 01:32
Since the actuarial present value will be determined solely by fringe benefits including the living benefit, that means that such APV must exceed the actual value by more than 20%. Bacause of that the insurer must calculate the RMD based on the APV only and that RMD must be distributed either from the IRA annuity or from another non annuity IRA using aggregation of RMDs. If the present value calculation divided by the Table III RMD divisor exceeds the LB amount that can be distributed, the RMD should be treated as completed.