Life and Death Planning for Retirement Benefits

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440 Life and Death Planning for Retirement Benefits
 Must satisfy all requirements applicable to annuitized defined contribution plans other than
the requirement that payments must start by the RBD. A-17(a)(3). The principle other
requirements are (1) the rule that the contract must provide level payments paid annually
(or more frequently) that do not increase (except within certain permitted limits, such as a
COLA), (2) limitations on the survivorship benefit allowed, and (3) rules for how to
compute the RMD with respect to the nonannuitized portion of the plan when only part of
the account is “annuitized.” For details see
 May not provide a commutation benefit, cash surrender right, or other similar feature. A-
17(a)(4).
 Must state that the contract is intended to be a QLAC. A-17(a)(6).
 Must not be a variable, equity-indexed, or “similar” contract except as may be later
permitted by Treasury guidance. A-17(a)(7).
 Must limit death benefits as described below. A-17(c).
10.3.04 Dollar and percentage limits on QLAC purchases
The amount paid for QLACs may not exceed the lesser of $125,000 or 25 percent of the
account balance. A participant can buy multiple QLACs in his/her traditional IRA(s) provided the
cumulative total premiums paid for them does not exceed these limits. Note the following details
about these purchase limits. Citations are to subsections of Reg. A-17, unless
otherwise noted.
 The $125,000 amount will be adjusted upwards for inflation starting in 2015. A-17(d)(2)(I).
 Premiums paid for QLACs (or contracts intended to be QLACs) purchased in any other
defined contribution plan for the participant’s benefit are counted in applying the dollar
limit. For example, if the participant spends $125,000 on a QLAC in her 403(b) plan
account at work, she has used up her dollar limit and cannot buy any additional QLAC in
the IRA. A-17(b)(2)(ii)(B).
 The 25 percent limitation is applied to the total account balance (including the value of any
QLAC). Unlike the dollar limit, the percentage limit is apparently applied without regard
to the account balance in other types of plans. A-17(b)(3). The Preamble to the regulation
states that all traditional IRAs will be considered a single account for applying this limit,
just as required minimum distributions taken from one traditional IRA can satisfy the
distribution requirement with respect to other traditional noninherited IRAs owned by the
same individual. See T.D. 9673 (7/2/14), Section II (“IRAs”), second paragraph. However,
I cannot find this statement in the regulation itself.
10.3.05 QLAC concept does not apply to Roth IRAs
The limitations on purchases of longevity annuities do not apply to Roth IRAs during the
owner’s life. That’s because there is no lifetime minimum distribution requirement applicable to a