IRA & qualified plan combined for QLAC?

Submitted by Gene Silvis on Tue, 2015-09-22 14:13

I have a 69 year old client, he has a small IRA ($70,000)and a large 401K (over $500,000). Can the IRA and $55,000 from the 401K be rolled into a QLAC?



Submitted by Alan - IRA critic on Tue, 2015-09-22 20:33

Edited to correct error. See my later post.

Submitted by Gene Silvis on Thu, 2015-09-24 16:20

I was given some information stating that you have to treat each vehicle as seperate, so could only take 25% of the year end value of the IRA and the same for the profit sharing or 401k plan. Is that correct?

Submitted by Alan - IRA critic on Thu, 2015-09-24 20:42

Yes, that is correct. I misinterpreted this statement in the QLAC Regs:

(B) The premiums paid on or before that date with respect to any other contract that is intended to be a QLAC and that is purchased for the employee under the plan, or any other plan, annuity, or account described in section 401(a), 403(a), 403(b), or 408 or eligible governmental plan under section 457(b).

Turns out that the above was not intended to mean that the plans could be aggregated after all. I will edit my prior post to eliminate reference to aggregation. But there appears to be another problem with the QLAC limit right after an IRA rollover. The Regs also indicate that the prior year end value of all IRA accounts applies (not the current value, rather the same value used to calculate an RMD), is used to determine the QLAC dollar amount and 25% limit. Therefore, for the year the 401k is rolled into the IRA, the total IRA value should not include the 401k rollover amount. and that would mean that the initial QLAC investment would be very limited until after the year end, then the rest could be purchased. That would reduce the RMD relief from the QLAC for the first RMD year for this client. This should all be checked out with the insurance carrier.

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