Nonqualifying Annuity

Nonqualifying annuity

An annuity that does not fall under an IRS-approved pension plan. Contributions are made with after-tax dollars, but earnings can accumulate tax-deferred until withdrawal.

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nonqualifying annuity

An annuity not approved by the Internal Revenue Service for tax-deferred pension contributions. A nonqualifying annuity permits the investor to defer taxes on income earned by the annuity but not to reduce taxable income for contributions made to the annuity. Compare qualifying annuity.

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Nonqualified Annuity

An annuity that one buys individually, rather than through an employer. Nonqualified annuities are not subject to the same restrictions as qualified annuities. As a result, withdrawal penalties are smaller or non-existent, and one may continue to make contributions to a more advanced age, sometimes until the annuitant is over 80. In the United States, specific restrictions on nonqualified annuities are set at the state level. The IRS does not regulate them; as a result, contributions are not tax-deductible, but earnings still are.