The "accumulation period" lasts from contract issue until the Annuity Starting Date
(ASD), during which the "accumulation units" of the separate accounts chosen will vary in value (and the contract value, which is the sum of those units), as well.
* A QLAC may offer a return of premium (ROP) feature that is payable before and after the annuity starting date
prior to age 85.
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
. The spousal annuity payments must commence on or before the date that would have been the participant's annuity starting date
While clients have the option of choosing an annuity starting date
that begins relatively quickly or far into the future with DIAs, these products often will allow the client to change the annuity starting date
that he or she originally chooses.
How is the owner taxed prior to the annuity starting date
It is anticipated that an employee would use the bulk of his plan account, along with Social Security and any other resources, as retirement income until the delayed annuity starting date
Specifically, Judge Jackson referred to the provision of the Employee Retirement Income Security Act (ERISA) that states, in pertinent part, that "a plan may provide that a qualified joint and survivor annuity...will not be provided unless the participant and spouse have been married throughout the one-year period ending on the earlier of (A) the participant's annuity starting date
, or (B) the date of the participant's death." Judge Jackson noted that the use of the word "may" makes the statute "permissive rather than mandatory." ERISA, therefore, does not require that the plan follow this particular statute, and both the plan and the plan administrator's interpretation are sound.
According to the IRS, a trust that owned an annuity contract which was to be distributed, prior to its annuity starting date
, to the trust's beneficiary, a natural person, was considered to hold the annuity contract as an agent for a natural person.
The method used to determine the exclusion ratio depends upon the annuity starting date
. Distributions are generally subject to mandatory withholding of 20 percent unless the employee elects a direct rollover.
However, if the annuity starting date
is after December 31, 1986, this exclusion ratio applies to payments received until the investment in the contract is fully recovered.
The method used for recovery of the cost basis depends on the participant's annuity starting date
"annuity starting date
"-the date on which benefit payments