Another Case: Annuitization of VA inside IRA, RMD?
A referral from another client:
Client has had a VA for 7 years. It is in an IRA, and the income base value is higher then the contract value. It has a feature where he can annuitize and get a 10 year period certain on his life, or a joint annuitization on a joint life. He is 71 now, so taking RMD’s.
If he does the joint annuitization, eventually the RMD’s will be greater than what the payment for RMD’s should be.
I have looked at the IRS codes as to what they think about it, but they seem gray area at best.
Thoughts??
Permalink Submitted by Al Fry on Wed, 2008-02-13 01:22
Annuitization satisfies the RMD requirement.
Permalink Submitted by Alan Spross on Wed, 2008-02-13 04:25
The June, 2004 RMD requirements for DB plans and annuities also applies to IRA annuities, and these Regs can be quite complex.
For example, if the beneficiary is a non spouse, any joint and survivor payment cannot be based on a beneficiary’s age more than 10 years younger. This does not apply to spouse’s. Basically, the IRS does not want any annuitization option, of which there are many, to extend the rate of distribution by any meaningful amount. The same rules apply to period certain payments. They can accelerate payments, but not extend them beyond what the Regs indicate. The insurance companies should be aware of all these requirements, and I doubt if the IRS looks at the calculations very closely. At least not until some loophole is exploited and the practice is targeted.