The Internal Revenue Service (IRS) has issued two new private letter rulings that may affect what a life insurer can pay annuity holders’ fee-based advisors directly from the annuity assets.
The IRS appears to have sent both of the letters to the same company: a life insurer that wants to offer three types of deferred annuity contracts.
- Copies of the new letter rulings are available here and here.
- An earlier article about annuity advisory fee letter rulings is available here.
The life insurer wants to pay the purchasers’ fee-based advisors directly from the plan assets, without the annuity holder having to pay federal income taxes on the money flowing from the annuity to the advisor.
From last August through November, the IRS put out many letter rulings answering similar questions. The taxpayers who asked those questions all said they’d cap the advisor fees at 1.5% of the annuity contract’s cash value per year.
In the new life insurer requests for IRS advice, which appear to be similar to the old requests, the life insurer has whited out the annual advisor fee caps.
It’s not clear from the letters whether the annual fee cap associated with those requests for advice is actually 1.5%, or if it’s some other number