RMD and Varibale Annuity with DB
Client has a Death Benefit of $33,962.74 and cash value of $1,131.94. Total contributions were $38,209.98 with total withdrawals of $39,196.00. Insurance company is saying the RMD for 2018 is $927.50. If a withdrawal is made account is closed and client loses DB.
What is the formula they use to do the calculation?
Permalink Submitted by Alan - IRA critic on Sun, 2018-02-04 03:01
It is a highly complex calculation per IRS Reg 1.401(a)(9)-6 that only the IRA custodian can do. Basically, the present value of additional benefits is calculated and that figure is added to the usual RMD calculated from the cash value. However, the present value calculation can be ignored if the ONLY additional benefit is a return of principal death benefit. It can also be ignored if the additional benefits add no more than 20% to the value of the contract, but only when withdrawals reduce the benefits on at least a pro rata basis. If client has another IRA account client can simply take the RMD indicated for the annuity from the other account under the RMD aggregation rules. Client should also be able to request a statement of how the RMD for the annuity was calculated.