Originally published July 6, 2005

The rules for qualified annuity contracts – contracts forming plans qualified under section 401(a), 403(a), 403(b), 408 or 457(b) of the Internal Revenue Code – include required minimum distributions generally at retirement or age 70-1/2, as well as at death. Under Treasury regulations adopted in 2004 and effective in 2006, the annual required minimum distribution (both during the participant’s lifetime and, following the participant’s death, to the participant’s beneficiary) from a qualified annuity contract prior to annuitization is generally based on (i) the dollar value credited to the contract on the prior December 31, plus (ii) subject to certain exclusions, the actuarial present value of any additional benefits that will be provided under the contract. The regulations – §1.401(a)(9)-6, Q&A 12 – contain two examples applying this rule.

The Society of Actuaries convened a working group to consider the types of "additional benefits" commonly found in annuity contracts, the assumptions that might reasonably be used in determining the actuarial present value of those benefits, and methods for reasonably computing those values. Click here to view the discussion paper prepared by the working group (included with permission from the Society of Actuaries, www.soa.org). Below are links to the attachments to the discussion paper containing the examples published in the regulations (Appendix A) and a series of examples illustrating the working group’s analysis (Appendices B through J).

Appendix A

Appendix F

Appendix B

Appendix G

Appendix C

Appendix H

Appendix D

Appendix I

Appendix E

Appendix J

The following lawyers are members of the Firm's Employee Benefits and Executive Compensation practice:
By George H. Bostick, Adam B., Cohen, Ian A. Herbert, Carol T. McClarnon Alice Murtos, Robert J. Neis, W. Mark Smith, William J. Walderman, Carol A. Weiser, Brendan M. Wilson and Walter H. Wingfield.

© 2005 Sutherland Asbill & Brennan LLP. All Rights Reserved.

This article is for informational purposes and is not intended to constitute legal advice.