IRS Sends Security Benefit an Annuity Advisory Fee Letter Ruling

By Allison Bell

February 16, 2021 at 12:00 PM

Share & Print

Security Benefit today said that it has an Internal Revenue Service interpretation that should make offering fee-based annuities cheaper and easier, both for the fee-based advisors and for the clients.

The Topeka, Kansas-based company has received an IRS private letter ruling that will allow the company to pay fees to advisors directly from an annuity contract's cash value, without creating a taxable event for the contract holder.

The letter ruling covers fees for ongoing investment advice equal to up to 1.5% of a contract's cash value per year.

Security Benefit now offers the commission-free ClearLine non-variable indexed annuity and the commission-free Elite Design variable annuity through a platform operated by DPL Financial Partners.

Security Benefit did not provide the date or number of the letter ruling it received.

The IRS has issued similar letter rulings to other life insurers since August.

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 Security Benefit's private letter ruling to their own advisory fee payment mechanisms.

NOT FOR REPRINT