The Internal Revenue Services has now issued a total of 18 private letter rulings concerning payment of asset-based fees for fee-based annuities, and Pacific Life has one of the letter rulings.
The IRS letter rulings will give the 18 recipients, and only those companies, use annuity assets to pay fees to the annuity holders’ advisors directly, without generating extra tax bills for the annuity holders.
As of Nov. 8, the IRS had posted just nine letter rules.
(Related: IRS Posts Annuity Fee Letter Rulings)
The agency posted eight letters Nov. 15, and a ninth letter Nov. 29.
Letter Ruling Basics
A “private letter ruling” is a document that shows how one IRS official has applied the tax rules to one taxpayer’s situation.
Life insurers who like the looks of the new letter rulings can use the text when writing requests for their own letter rulings.
But, if life insurers want to help annuity buyers keep advisory fees out of taxable income, they have to apply for their own letter rulings. They can’t apply Pacific Life’s private letter ruling to their own advisory fee payment mechanisms.
New Letter Ruling Details
Pacific Life announced Wednesday that it, like the letter ruling recipients that had talked about their letters on or before Nov. 8, could use its ruling to allow for advisory fees to be withdrawn from an annuity contract held outside of a retirement account without creating a taxable event.