Determining RMDs for Variable Annuities

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alexcr
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Determining RMDs for Variable Annuities

Post by alexcr »

I had three variable annuities held in IRA accounts - one with Allianz, one with Equitable, and one with Pacific Life.

This January, I exited these contracts and transferred the funds over to index funds held in my Vanguard IRA. However, because these variable annuities were still outstanding as of 12/31/20, their values at that point in time are needed to determine my RMD required for 2021.

For the Allianz contract, I received a tax information notice at the beginning of this year that included my 2020 Form 5498 information, including the contract's fair market value as of 12/31/20.

However, for my Equitable and Pacific Life contracts, I've received no such notices (just 1099-Rs, which aren't helpful for these purposes as far as I'm aware), and we're almost halfway through 2021. I'm left a bit confused as to how I'm suppose to go about calculating my RMD (which I need to set up with Vanguard) without the 12/31/20 fair market value information for these two contracts.

Any guidance would be greatly appreciated. Among other things, is there any reason Allianz would issue a Form 5498, but not the other two contracts?
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Stinky
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Re: Determining RMDs for Variable Annuities

Post by Stinky »

Have you tried to get in touch with Equitable and Pacific Life about the missing form?

That's the first thing that I would try.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
alexcr
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Re: Determining RMDs for Variable Annuities

Post by alexcr »

Stinky wrote: Sun Jun 13, 2021 5:25 am Have you tried to get in touch with Equitable and Pacific Life about the missing form?

That's the first thing that I would try.
I've spoken with Equitable and Pacific Life in the past and inquired specifically about Form 5498, which is what I received from Allianz, but the reps I spoke with didn't seem familiar with this form and seemed uncertain on whether this is information they provide (which is confusing, because isn't this fair market value information they're required to calculate and provide?). So I wasn't able to get much clarification from them, unfortunately.
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Stinky
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Re: Determining RMDs for Variable Annuities

Post by Stinky »

alexcr wrote: Sun Jun 13, 2021 5:28 am
Stinky wrote: Sun Jun 13, 2021 5:25 am Have you tried to get in touch with Equitable and Pacific Life about the missing form?

That's the first thing that I would try.
I've spoken with Equitable and Pacific Life in the past and inquired specifically about Form 5498, which is what I received from Allianz, but the reps I spoke with didn't seem familiar with this form and seemed uncertain on whether this is information they provide (which is confusing, because isn't this fair market value information they're required to calculate and provide?). So I wasn't able to get much clarification from them, unfortunately.
Per the attached link, it looks like Pac Life has until June 30, 2021 to mail out 5498s. I expect that this applies to all companies.

Hopefully yours will come within this timeframe.

https://annuities.myaccount.pacificlife ... swers.html
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Alan S.
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Re: Determining RMDs for Variable Annuities

Post by Alan S. »

These insurance companies should have either provided a statement by 1/31 of the RMD amount or a statement by that date offering to calculate the RMD amount (per 1099R Inst. p 18). This should not be deferred until the 5498 due date, which this year has been extended to 6/30. The extension probably explains why 2 companies have not yet provided a 5498, but this does not excuse any of them from the 1/31 RMD statement.

FYI - The IRA VA valuation for RMD purposes can be a complex actuarial calculation, and it may be different than the value used to report a conversion of the IRA VA. These companies should be sure that their RMD amount of valuation for RMD purposes is correct on their statement or on Form 5498.

https://www.soa.org/globalassets/assets ... mbined.pdf
Topic Author
alexcr
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Re: Determining RMDs for Variable Annuities

Post by alexcr »

Thanks, Stinky and Alan. I wasn't aware that the Form 5498 deadline had been extended to June 30. (To be honest, I was only vaguely aware there was a deadline!)

And, yes, it would make sense that both Equitable and Pacific Life would have had to provide the RMD information well before this deadline. Unlike Allianz, neither did, and when I called to inquire about this, representatives of both seemed fairly ignorant on the matter.

At this point, it seems my best bet might just be to wait until June 30 and hope that both companies meet this Form 5498 deadline.
fabdog
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Re: Determining RMDs for Variable Annuities

Post by fabdog »

If you have online access go look for an online statement for both. If not, look at what you got from them in late January. Many companies send out a year end statement in January that shows balances, what funds held, and in most cases, on the last page, shows the RMD required for the upcoming year.

If not, call and ask for your year end statement. That should get you what you need. The phone reps may not be familiar with the 5498 terminology

Mike
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HueyLD
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Re: Determining RMDs for Variable Annuities

Post by HueyLD »

The RMD calculation is more complicated for annuities within retirement accounts as Alan so noted above.

Here is a plain language explanation:

“ Beginning January, 2006, clients age 70 1/2 and over with annuities in their IRA, 403(b), qualified plan, government 457, Keogh, Inherited IRA or Inherited TSA may be affected by a new IRS ruling.

The new regulation requires that the actuarial present value of an annuity’s “additional benefits” be added to the end of year account value for determining required minimum distributions (RMDs). This new value is known as the “entire interest.” This would require a greater RMD than would have been required if only the account value was used in the calculation. Benefits that may be included in this IRS ruling include death benefits and living benefits.

The IRS ruling includes contracts with a living benefit feature, on a dollar-for-dollar basis for distributions, where the actuarial present value of the guarantee is 20 percent greater than the contract value. Also included are death benefits, excluding premium guarantee death benefits, on contracts with a death benefit feature, on a dollar for dollar basis for withdrawals, where the actuarial present value of the guarantee is 20 percent greater than the contract value. In these instances, the actuarial present value of the benefit will be added to the account value for purposes of calculating the RMD. Death benefits that guarantee a return of premium, benefits (death or living) that adjust on a pro-rata basis when a withdrawal is taken, or benefits that have an actuarial present value of less than 20 percent of contract value are not included for purposes of this calculation.

This means that there will be minimal, if any, impact if the additional benefit is a return of premium death benefit. However, if the living or death benefit is disproportionately higher than the account fair market value the impact may be much greater.”

http://www.hwm.wfadv.com/files/15310/RM ... 5D~001.pdf
Topic Author
alexcr
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Re: Determining RMDs for Variable Annuities

Post by alexcr »

fabdog wrote: Sun Jun 13, 2021 2:38 pm If you have online access go look for an online statement for both. If not, look at what you got from them in late January. Many companies send out a year end statement in January that shows balances, what funds held, and in most cases, on the last page, shows the RMD required for the upcoming year.

If not, call and ask for your year end statement. That should get you what you need. The phone reps may not be familiar with the 5498 terminology

Mike
You're right!!! This information was included for both contracts in their year-end statements, just hidden towards the back with no real callout, so I completely overlooked it (also in part because I expected it to be provided separately, as Allianz did).

Thanks so much for prompting me to have another look.
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