Well, the IRS changed the rules and AIG responded. In fact, it appears to have been first out of the gate.
AIG’s American General Life Insurance Co. has now jumped in with its American Pathway Deferred Income Annuity, which it noted in a product bulletin “is now eligible to be designated as a QLAC when purchased as a traditional IRA.”
While the new rules allow QLACs to be offered in DC plans, the first to come out were expected be those for IRAs.
QLACs are deferred income annuities that don’t begin to make payments until considerably later in life than the standard annuities — say, age 80 or even 85.
NAFA has released a paper that helps advisors answer clients’ most important annuity questions.
The problem, before the IRS issued its rule change, was that although people might have acquired DIAs, and even if they’d used retirement account money to pay for them, they would still have to begin taking payments at age 70½, in accordance with required income distribution regulations.
Now, however, that change in regulations has ushered in what companies hope will be a sea change for the QLAC, allowing longevity annuities that meet certain requirements to be designated QLACs and satisfy the RMD rules without making payments until the date in the QLAC contract.
AIG was first off the mark with a QLAC product, although it’s expected that several other companies will enter the market before the end of the year.
There are limitations to what constitutes a QLAC, among them the restrictions on premiums and purchase payments — no more than $125,000 from a qualifying retirement plan, for example, can be used to purchase a QLAC, and no more than 25 percent of the amount in any one qualifying plan can be used for the purchase of one or more QLACs.
In the American Pathway DIA, if the owner dies before payout begins, the options are no death benefit or a return of premium. No interest is allowed on the return-of-premium option.