A QLAC may also provide a life annuity to a spouse who is the sole beneficiary of a participant who dies before his or her annuity starting date
Section 401(a)(11)(A) of the Internal Revenue Code of 1986, as amended requires that the surviving spouse receive a qualified preretirement survivor annuity benefit if the participant spouse dies before the annuity starting date
or a qualified joint and survivor annuity benefit if the participant dies after the annuity starting date
Under the new method, the portion of each annuity payment that represents a return of basis equals the employee's total basis as of the annuity starting date
, divided by the number of anticipated payments, which is now determined under a table based upon the employee's age as of the annuity starting date
The new distribution form would have a new annuity starting date
, and the election would be subject to the spousal consent requirements.
To determine the investment in the contract as of the annuity starting date
(under IRC [section] 72(c)(1)), the aggregate amount of premiums or other consideration paid for the contract equals the portion of the amount realized on the exchange that is attributable to the contract--which is the contract's FMV at the time of the exchange.
Periodic payments are taxed under the annuity rules of section 72 if received from a qualified plan when the participant is 75 or older on the annuity starting date
and if the annuity payments are guaranteed for at least five years.
Cost-of-living adjustments must be based on a recognized index and may not exceed the cumulative index increase since the annuity starting date
Annuity distributions received after the annuity starting date
are treated partially as a nontaxable return of capital and partially as taxable income.
1275-1(j)(6)(iii) provides that the termination date can be set at two times (or greater) the life expectancy of the annuitant (2 x life) as of the annuity starting date
Life of one individual: If the annuity is based on the life of only one individual, the expected number of payments is the same as under Table I, above, based on the annuitant's age (rather than the age of the primary annuitant) at the annuity starting date
In general, notice to participants and spouses has to be given no less than 30 days and no more than 90 days before the annuity starting date
The number of years is calculated at the annuity starting date
and the subsequent-year payments are determined by reducing the initially calculated term by one for each year thereafter.