Tax Facts

558 / Can a taxpayer purchase both QLACs and non-QLAC DIAs within an IRA and remain eligible to exclude the QLAC value when calculating RMDs? How is the non-QLAC DIA treated in such a case?

The regulations answer this question by their focus: only QLACs are addressed within the regulations. IRA-held DIAs that are not QLACs are not governed by the new regulations. These regulations are additive in that they do not remove any of the previously existing rules that govern these types of annuity contracts. As a result, the regulations do not prevent a taxpayer from holding a non-QLAC DIA in a traditional IRA. In such a case, the previously existing method for determining RMDs for non-QLAC DIAs will apply.

The actuarial present value [APV] (which may be referred to as fair market value [FMV]) is calculated and RMDs attributable to that value must be withdrawn from another IRA or through a commutation liquidation from the DIA contract itself. After the annuity starting date, the income payments from the DIA automatically satisfy the RMD requirement. No separate calculation is required.

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