RMD and annuity accumulation value versus Income Rider value
Thanks in advance:
Here is my question/concern:
I have a client with an IRA in a fixed annuity. Here is info on the annuity, regarding the 2018 RMD:
Accumulation value (12/31/2017) is $65,355
Income rider value (12/17/2017) is $75, 312
Client is 72 this year in 2018, thus a 25.6 factor is being used for the RMD.
They are using the INCOME RIDER value as the amount to calculate the RMD. Is that the norm? It does cause a larger RMD, of which the client does not want to take.
Is it possible that this company is interpreting the IRS rules differently that other annuity companies?
Permalink Submitted by Alan - IRA critic on Fri, 2018-03-30 00:35
The insurance company must compute an actuarial present value for all additional benefits under the contract as of 12/31/2017. Generally, if such actuarial value does not exceed 120% of the cash value, the RMD is calculated using the cash value. Perhaps the death benefit or other additional benefits exist that push the total actuarial value up to 78, 426 which is the 120% threshold. Therefore, if they indicate the RMD is based on 75,312, there appears to be a conflict with the Reg. since if the RMD is based on a figure more than 65,355, it should be at least 78,426. Client should ask for an explanation why the 120% threshold is apparently being overlooked. Note that if the death benefit value added to the income rider value pushes the total over 78,426, the RMD would be even higher. I don’t know how forthcoming companies tend to be when it comes to providing a detailed breakdown of their calculations. See IRS Reg 1.401(a)(9)-6, Q 12.