New Tax Guidance on Use of Annuities in Retirement Plans


On February 2, 2012, the Internal Revenue Service (IRS) and Department of Treasury, together with the White House, released four pieces of guidance with the stated purpose of easing certain burdens on providing annuity distribution options under qualified plans, individual retirement accounts (IRAs) and other retirement arrangements and otherwise encouraging the use of annuity distribution options. The guidance includes:

  • Proposed regulations providing exceptions to certain required minimum distribution (RMD) rules under Internal Revenue Code (Code) section 401(a)(9) for qualified longevity annuity contracts under qualified defined contribution plans, IRAs and 403(b) and 457(b) plans.
  • A revenue ruling that addresses how to apply the qualified joint and survivor annuity and qualified pre-retirement survivor annuity rules to a profit sharing plan that offers deferred annuities.
  • A revenue ruling providing rules for rollovers from a 401(k) or other profit sharing plan to an employer’s defined benefit pension plan to obtain an annuity distribution for all or a portion of the profit sharing account balance.
  • Proposed regulations that would permit defined benefit plans to provide a lump sum for a portion of the benefit and an annuity for the remainder of the benefit on more favorable terms than is permissible under current laws.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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