SPIA Payouts and 72t
Would the use of a Single Premium Immediate Annuity with a payout rate higher than the calculated SEPP % using the amortization method disqualify the annuity from the penalty tax exemption?
Would the use of a Single Premium Immediate Annuity with a payout rate higher than the calculated SEPP % using the amortization method disqualify the annuity from the penalty tax exemption?
Permalink Submitted by Scott Cousino on Thu, 2010-04-29 20:16
Great question, kturner! Did you ever receive a reply?
Permalink Submitted by Alan Spross on Fri, 2010-04-30 03:51
Whether in an IRA or a NQ annuity, the interest rate used by the insurance company for an SPIA calculated for a life payout will qualify for the penalty exception. However, to garner some security for the annuity owner, it is advisable to get in writing from the insurer that the 1099R will be coded with a “2” in Box 7 up to age 59.5.
Since SPIA monthly distributions vary considerably from company to company, apparently they do not required to use the same mortality or interest rates or that variation would not exist. Non SPIA 72q or 72t plans develop identical annual distributions regardless of custodian.