Permalink Submitted by Alan Spross on Tue, 2012-06-05 21:42
They can and should if the insuror is aware of the permitted rules in IRS Reg 1.401(a)(9)-6. Most of these IRS Regs are designed to assure that annuity design cannot result in a slower rate of distribution than allowed. For example, if the SPIA is based on joint life expectancy and/or period certain, there are limits to how much younger the beneficiary is or how long the period certain is allowed to be relative to the owner’s age and life expectancy.
A simple life annuity will meet the requirements, however in years after the annuitization year, the IRA RMDs for the annuity and other IRA accounts must stand on their own, ie cannot be aggregated since the annuity will no longer have a prior year end balance.
The Regs are vague with respect to short period certain SPIAs – for example a 65 year old annutizing an IRA for 10 years. That 10 years bridges the period when RMDs must otherwise begin, so while the money is being distributed much faster than ordinary RMDs, there is a question in defining them as RMDs. Defining RMDs is key because if a given distribution eg at age 65 is considered to be an RMD, then it cannot be rolled over.
Permalink Submitted by Terry Bobo on Wed, 2017-12-13 18:58
Client is age 70 and 3 years into a 10 year period certain annuity using qualified money. Annual SPIA payments are $24k.Client has 2 other IRAs and RMD this year (based on EOY 2016 balances) is just shy of $9100.Does the SPIA income of $24k cover the RMD of $9100 or does he need to take the $9100 RMD on top of the $24k qualfied SPIA income? Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2017-12-13 19:10
Since annuitization eliminated the year end account balance of the IRA annuity, the SPIA distribution is considered the RMD for that account and the RMDs cannot be aggregated with the other non annuity accounts. Of course, the other 2 IRA RMDs can be aggregated with each other, but 9100 must be distributed in any combination from those 2 accounts.
Note that the RBD for the IRA annuity was the day of the first SPIA distribution, and all distributions from that account were therefore RMDs and not eligible for rollover from Day 1. However, the other two accounts could still defer the age 70.5 RMD to the following year if there is any benefit of doing that. These two accounts have the usual RBD of 4/1 of the year following the year 70.5 is attained.
Permalink Submitted by Alan Spross on Tue, 2012-06-05 21:42
They can and should if the insuror is aware of the permitted rules in IRS Reg 1.401(a)(9)-6. Most of these IRS Regs are designed to assure that annuity design cannot result in a slower rate of distribution than allowed. For example, if the SPIA is based on joint life expectancy and/or period certain, there are limits to how much younger the beneficiary is or how long the period certain is allowed to be relative to the owner’s age and life expectancy.
A simple life annuity will meet the requirements, however in years after the annuitization year, the IRA RMDs for the annuity and other IRA accounts must stand on their own, ie cannot be aggregated since the annuity will no longer have a prior year end balance.
The Regs are vague with respect to short period certain SPIAs – for example a 65 year old annutizing an IRA for 10 years. That 10 years bridges the period when RMDs must otherwise begin, so while the money is being distributed much faster than ordinary RMDs, there is a question in defining them as RMDs. Defining RMDs is key because if a given distribution eg at age 65 is considered to be an RMD, then it cannot be rolled over.
Permalink Submitted by Terry Bobo on Wed, 2017-12-13 18:58
Client is age 70 and 3 years into a 10 year period certain annuity using qualified money. Annual SPIA payments are $24k.Client has 2 other IRAs and RMD this year (based on EOY 2016 balances) is just shy of $9100.Does the SPIA income of $24k cover the RMD of $9100 or does he need to take the $9100 RMD on top of the $24k qualfied SPIA income? Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2017-12-13 19:10