MYGA - Florida

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

MYGA - Florida

Post by typical.investor »

I am considering using a MYGA (since 3% rates are much better than CDs and treasuries to replace maturing 3% CDs) but have a few questions I wonder if anyone can answer:

1) At maturity, I assume one could do a 1035 Exchange to another company if necessary. I would plan to obtain the best available SPIA at some point. (I assume it's doable)

2) What happens if you move to a different state in terms of insurance protection? The Florida Insurance Guaranty Association insurance carrier insolvency, but only for Florida residents.

Florida statue 631.695 states:
“Covered claim” means an unpaid claim... if such insurer becomes an insolvent insurer and the claimant or insured is a resident of this state at the time of the insured event
If the insurance company were covered in your new State, could that get you coverage there? (no idea)

If I maintain my drivers license/voting record/declaration of domicile in FL at least until the MYGA matures and I could transfer it, would that mean I am resident (I assume yes as all you need to prove residency to the Florida Property Appraiser’s office for purposes of obtaining the Homestead exemption is a FL DL and having all vehicles titled in FL).

Actually, even without moving this is a concern as an expat. I spend much more time in FL now than anywhere else in the US, but do live overseas.

3) Does the Florida Insurance Guaranty Association insurance claim limit (if insurer goes under) of $300,000 per claim allow you to have more than one policy that is insured? (I assume you can)

https://figafacts.com/frequently-asked-questions/

Discussion on what constitutes a claim
https://casetext.com/case/florida-ins-g ... sNav=false

I am not looking for legal advice. I know I could see a lawyer but the advice has always been that absent clear rulings it's only a guess. Just trying to find out if anyone has familiarity here.
livelovelaugh00
Posts: 243
Joined: Sun Dec 25, 2016 7:15 pm

Re: MYGA - Florida

Post by livelovelaugh00 »

You could use hmbradley's 3% checking account. The maximum deposit for the account is $100k. I received 1099 for the interest earned from Hatch bank.
User avatar
Stinky
Posts: 14149
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: MYGA - Florida

Post by Stinky »

typical.investor wrote: Sat Mar 13, 2021 8:10 pm I am considering using a MYGA (since 3% rates are much better than CDs and treasuries to replace maturing 3% CDs) but have a few questions I wonder if anyone can answer:

1) At maturity, I assume one could do a 1035 Exchange to another company if necessary. I would plan to obtain the best available SPIA at some point. (I assume it's doable)

2) What happens if you move to a different state in terms of insurance protection? The Florida Insurance Guaranty Association insurance carrier insolvency, but only for Florida residents.

Florida statue 631.695 states:
“Covered claim” means an unpaid claim... if such insurer becomes an insolvent insurer and the claimant or insured is a resident of this state at the time of the insured event
If the insurance company were covered in your new State, could that get you coverage there? (no idea)

If I maintain my drivers license/voting record/declaration of domicile in FL at least until the MYGA matures and I could transfer it, would that mean I am resident (I assume yes as all you need to prove residency to the Florida Property Appraiser’s office for purposes of obtaining the Homestead exemption is a FL DL and having all vehicles titled in FL).

Actually, even without moving this is a concern as an expat. I spend much more time in FL now than anywhere else in the US, but do live overseas.

3) Does the Florida Insurance Guaranty Association insurance claim limit (if insurer goes under) of $300,000 per claim allow you to have more than one policy that is insured? (I assume you can)

https://figafacts.com/frequently-asked-questions/

Discussion on what constitutes a claim
https://casetext.com/case/florida-ins-g ... sNav=false

I am not looking for legal advice. I know I could see a lawyer but the advice has always been that absent clear rulings it's only a guess. Just trying to find out if anyone has familiarity here.
Yes, at maturity you should be able to do a 1035 exchange to another annuity product, including a SPIA.

Look at the website of the Florida Guaranty Fund for lots of information. Website is https://www.flahiga.org/

Question 5 of the FAQs says:
If I move to another state after purchasing a policy, will I still have guaranty association coverage? If so, who will provide it?

If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled.

From the website, I believe that the maximum annuity cash value that is covered is $250k. The $300k benefit you refer to is for annuities “in benefit”; that is, currently being paid out (like a SPIA).

I believe that the $250k limit is per insurance company. That is, if you were unfortunate enough to buy MYGAs from two insurers that went insolvent, I believe you would have coverage up to $250k for each company.

I’d suggest that you get in touch with the FL Guaranty Association to make sure you’ve got the answers you need. Contact information is on the website.

Post back if you have questions.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Super Hans
Posts: 308
Joined: Sat Jul 14, 2012 9:18 pm
Location: Washington, D.C.

Re: MYGA - Florida

Post by Super Hans »

How does Florida's 1% premium tax apply to MYGAs, if at all? I can't figure it out readily, and that seems like it could be a deal killer for Floridians.
User avatar
Wiggums
Posts: 7050
Joined: Thu Jan 31, 2019 7:02 am

Re: MYGA - Florida

Post by Wiggums »

livelovelaugh00 wrote: Sun Mar 14, 2021 8:48 am You could use hmbradley's 3% checking account. The maximum deposit for the account is $100k. I received 1099 for the interest earned from Hatch bank.
Here is a review of the HMBradley offering
https://www.businessinsider.com/persona ... unt-review
"I started with nothing and I still have most of it left."
User avatar
Stinky
Posts: 14149
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: MYGA - Florida

Post by Stinky »

Super Hans wrote: Sun Mar 14, 2021 11:14 am How does Florida's 1% premium tax apply to MYGAs, if at all? I can't figure it out readily, and that seems like it could be a deal killer for Floridians.
See this website, and quote extracted below.
https://www.annuity.org/annuities/buy/s ... emium-tax/

When Are Premium Taxes Due?

You will pay state premium taxes at one of two points in time.

If you buy an immediate annuity, you will pay the premium tax up front. The tax won’t be added to your out-of-pocket premium payment. Instead, it will be deducted from the initial value of the annuity contract.

When someone buys a deferred annuity, the premium tax is collected during the annuitization, or payout, phase. The premium tax will be deducted from the first payment.


Unpacking this, there will be a premium tax assessed when you start receiving payments from an annuity. That tax will be reflected in the payment amount that you are quoted.

When you see a MYGA rate quoted somewhere, what you see is what you get.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Super Hans
Posts: 308
Joined: Sat Jul 14, 2012 9:18 pm
Location: Washington, D.C.

Re: MYGA - Florida

Post by Super Hans »

Stinky wrote: Sun Mar 14, 2021 11:24 am
When you see a MYGA rate quoted somewhere, what you see is what you get.
:thumbsup This makes it easy. Thanks!
User avatar
HueyLD
Posts: 9789
Joined: Mon Jan 14, 2008 9:30 am

Re: MYGA - Florida

Post by HueyLD »

Stinky said: “ Unpacking this, there will be a premium tax assessed when you start receiving payments from an annuity. That tax will be reflected in the payment amount that you are quoted.”

My reading of the above sentence is that a premium tax is only assessed upon annuitization. So, if one simple withdraw the money upon the end of the guaranteed period, then no premium tax will be assessed.

Please provide your expert advice, Mr. Stinky.
User avatar
Stinky
Posts: 14149
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: MYGA - Florida

Post by Stinky »

HueyLD wrote: Sun Mar 14, 2021 11:39 am Stinky said: “ Unpacking this, there will be a premium tax assessed when you start receiving payments from an annuity. That tax will be reflected in the payment amount that you are quoted.”

My reading of the above sentence is that a premium tax is only assessed upon annuitization. So, if one simple withdraw the money upon the end of the guaranteed period, then no premium tax will be assessed.

Please provide your expert advice, Mr. Stinky.
I spoke somewhat loosely. :oops:

“Payments” are monthly amounts that result from the annuitization of the annuity. They are not amounts paid out by an insurance company upon the surrender of the deferred annuity for cash, nor are they proceeds that are rolled to an annuity.

In other words, i agree with you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
Topic Author
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

Re: MYGA - Florida

Post by typical.investor »

Stinky wrote: Sun Mar 14, 2021 10:18 am
Look at the website of the Florida Guaranty Fund for lots of information. Website is https://www.flahiga.org/

Question 5 of the FAQs says:
If I move to another state after purchasing a policy, will I still have guaranty association coverage? If so, who will provide it?

If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled.

From the website, I believe that the maximum annuity cash value that is covered is $250k. The $300k benefit you refer to is for annuities “in benefit”; that is, currently being paid out (like a SPIA).

I believe that the $250k limit is per insurance company. That is, if you were unfortunate enough to buy MYGAs from two insurers that went insolvent, I believe you would have coverage up to $250k for each company.

I’d suggest that you get in touch with the FL Guaranty Association to make sure you’ve got the answers you need. Contact information is on the website.

Post back if you have questions.
Thanks for the info. That's very helpful.
User avatar
Topic Author
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

Re: MYGA - Florida

Post by typical.investor »

Stinky wrote: Sun Mar 14, 2021 12:23 pm
HueyLD wrote: Sun Mar 14, 2021 11:39 am Stinky said: “ Unpacking this, there will be a premium tax assessed when you start receiving payments from an annuity. That tax will be reflected in the payment amount that you are quoted.”

My reading of the above sentence is that a premium tax is only assessed upon annuitization. So, if one simple withdraw the money upon the end of the guaranteed period, then no premium tax will be assessed.

Please provide your expert advice, Mr. Stinky.
I spoke somewhat loosely. :oops:

“Payments” are monthly amounts that result from the annuitization of the annuity. They are not amounts paid out by an insurance company upon the surrender of the deferred annuity for cash, nor are they proceeds that are rolled to an annuity.

In other words, i agree with you.
So if I am reading this correctly, one could take withdrawals (the policy I am looking at allows up to 10% per year) without triggering the premium tax.
User avatar
HueyLD
Posts: 9789
Joined: Mon Jan 14, 2008 9:30 am

Re: MYGA - Florida

Post by HueyLD »

“ So if I am reading this correctly, one could take withdrawals (the policy I am looking at allows up to 10% per year) without triggering the premium tax.”

Yes.
User avatar
Stinky
Posts: 14149
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: MYGA - Florida

Post by Stinky »

typical.investor wrote: Mon May 10, 2021 7:34 am So if I am reading this correctly, one could take withdrawals (the policy I am looking at allows up to 10% per year) without triggering the premium tax.
Yes, that is correct. Given the FL language posted upthread, any type of withdrawals from an annuity except for an "annuitization" should not have premium tax. And taking a 10% withdrawal is not an annuitization.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
2lovehim
Posts: 5
Joined: Mon Apr 23, 2018 12:19 pm

Re: MYGA - Florida

Post by 2lovehim »

As you are an expat, have you considered the tax implications of this in your host country?
International tax authorities know what to do with a 1099 for a CD. I'd like to consider MYGAs, but i don't want to get into tax probs abroad.
User avatar
Topic Author
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

Re: MYGA - Florida

Post by typical.investor »

2lovehim wrote: Fri May 14, 2021 3:11 pm As you are an expat, have you considered the tax implications of this in your host country?
Considered - yes. Definitively decided - no. Able to give advice - no.
2lovehim wrote: Fri May 14, 2021 3:11 pm International tax authorities know what to do with a 1099 for a CD. I'd like to consider MYGAs, but i don't want to get into tax probs abroad.
I think the first option is to simply pay taxes to your country of residence as if the annuity were not tax sheltered (tracking your cost basis) and then again to the US on withdrawals. I don't see why declaring MYGA income as interest would cause a problem overseas, but that depends on your tax authority's view I guess.

An alternative, which would call for legal consultation as specifics per country are quite different, would be to use a self-settled irrevocable trust to hold the annuity. Since the trust is filling its own tax return, and the assets are out of your estate, it's not something that your country of residence could tax. And as the annuity is tax deferred, the compressed tax brackets of the trust wouldn't be an issue. Once, you start taking withdrawals, income would flow to the beneficiary's return and be taxable by both countries (allowing to you to get a credit for taxes paid in one against the other).

My lawyer advised me that a trust should be fine, but as there were no actual rulings in my country of residence it isn't actually known how courts might rule if you got hauled in for a tax dispute. Your lawyer even in the same country might advise something else. And there is also the issue of whether the money for the trust is subject to gift taxes in either the US or your country of residence.

So yeah. Quite a bit of uncertainty here.
Post Reply