december 9, 2008
RMD’s from Qualified Plans
«back to press roomIf you have clients with Qualified Plans that require minimum distributions in 2008, read on.
At a time when the value of your client’s Qualified Plan may be stressed, the IRS may require a larger distribution. Clients that will be taking a RMD this year from an annuity with a death benefit or a guaranteed account value or other enhancements need your help.
Under IRC 401(a)(9), effective for distributions beginning in 2006, the IRS requires an amount to be added to the year-end value of an annuity contract in calculating the RMD to be withdrawn for any year. The amount to be added is the “actuarial present value” of certain additional guaranteed contract benefits that will be provided under the contract (such as an enhanced death benefit or the Guaranteed Income Benefit).
Historically, account values have always been higher than the values used for death benefit options or GIB benefit values. But with the recent downturn in the markets, many of your clients have contract benefit values that exceed their base account values at the end of 2008. What does this mean to you and your clients?
Your clients may have to withdraw a higher RMD than originally anticipated – the insurance carrier should provide your clients with the RMD value. This means that your clients may be required to withdraw more from the qualified annuity, and therefore they will deplete the funds faster than anticipated. The plan may not last their entire lifetime as planned.
LLIS can help. To guarantee that your clients have income they cannot outlive in retirement, you may want to consider transferring the assets in the Qualified Plan to a qualified immediate annuity that will guarantee an income stream for the rest of their life and avoid the pitfall of another costly RMD. Contact jerryskapyak@llis.com for more information.
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