3646 / What information must be provided to a buyer of an IRA?
The disclosure statement must include certain items in plain language such as provisions related to when and how the IRA can be revoked and the contact information for the person to receive the notice of cancellation. An individual revoking his or her plan is entitled to the return of the full amount he or she paid without adjustment for sales commission, administrative expenses, or fluctuation in market value. If the governing instrument is amended after the IRA is no longer subject to revocation, a copy of the amendment (and possibly a “disclosure statement”) must be furnished to the individual not later than the 30th day after the later of the date the amendment is adopted or becomes effective.1
IRS regulations also provide that, if values under an individual retirement arrangement are guaranteed or can be projected, the trustee or issuer must in certain instances disclose to an IRA purchaser the amounts guaranteed or projected to be withdrawable. Basically, these regulations provide that the trustee must show the owner the amount the owner could receive if he or she closed the account and paid any surrender charges or penalties at the end of each of the first five years after the initial contribution and at ages 60, 65, and 70.2 In making the disclosure, the trustee must show the amount guaranteed (or projected) to be withdrawable, after reduction for all charges or penalties that may be applied. The disclosures required for values at an owner’s ages 60, 65, and 70 must be based on the actual age of the individual at the time of the disclosure. If a guaranteed rate is actually lower than the rate currently being paid on an account, the disclosure statement may use the higher rate, but must clearly indicate that the guaranteed rate is lower.3
For the reporting requirements imposed on IRA trustees with respect to required minimum distributions, see Q 3698.
1. Treas. Reg. § 1.408-6(d)(4).