Nonqualified plan

(redirected from Non-Qualified Annuity)

Nonqualified plan

A retirement plan that does not meet the IRS requirements for favorable tax treatment.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Nonqualified Plan

An annuity or pension plan that one buys individually rather than through an employer. Nonqualified plans are not subject to the same restrictions as qualified plans. As a result, withdrawal penalties are smaller or non-existent, and one may continue to make contributions to a more advanced age (sometime until the annuitant is over 80). In the United States, specific restrictions on nonqualified plans are set at the state level. The IRS does not regulate them; as a result, contributions are not tax-deductible, but earnings still are.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
With a non-qualified annuity or a modified endowment life insurance contact, earnings are taxed first, then basis, Keebler said.
What about customers who have one qualified and one non-qualified annuity? Will producers be able to put on two separate hats?
Annuity LTC plans: Annuity/LTC plans with tax-qualified benefits allow a holder of a non-qualified annuity to get benefits out of the policy, tax free, to pay for LTC.
Clients should consult their financial professionals and tax advisors to explore these post-death "inherited" IRA or "inherited" non-qualified annuity distribution options.
Concern about higher taxes should offer a boost in non-qualified annuity sales by making tax deferral benefits more attractive, particularly among affluent clients, since it appears that some of the Bush-era tax cuts on marginal income and capital gains tax rates will revert to pre-2003 levels next year.
With a non-qualified annuity LTC benefits can be paid from a tax-qualified LTC rider provided the rider complies with the requirements of a QLTCI.
In addition, an IRS imposed 10 percent penalty will apply to the extent of gains distributed prior to age 59 1/2; this age-based restriction is effectively a trade-off for the tax-deferred benefit of the non-qualified annuity.
Note: This is assumed to be a non-qualified annuity and the word annuitant is used in lieu of client.
There's another avenue you might not be familiar with: the use of an existing non-qualified annuity to fund a life-based LTC policy.
Furthermore, thanks again to the PPA, clients can receive true LTC benefits from their non-qualified annuity (pursuant to PPA guidelines) completely tax-free.
Your male, 62-year old client purchased two non-qualified annuity contracts in 2004 from a life insurance company.
IRC Section 72(s)(2) allows the non-qualified annuity to be distributed over the life expectancy of a designated individual beneficiary as long as distributions start no later than 1 year after the annuitant's death.

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