IRS Issues Final Regulations On Longevity Annuities

With the goal of providing retirees with more options to manage their retirement income, the IRS issued final regulations on "qualified longevity annuity contracts" (QLACs). A QLAC is a type of deferred annuity that commences at an advanced age and continues for the life of the retiree.

A QLAC can be offered under a defined contribution plan such as a 401(k), 403(b), and 457(b) plan, or other employer-sponsored individual account plans, as well as IRAs (except  Roth IRAs). This rule allows retirees to spend a portion of their retirement savings on a lifetime income stream, while retaining other assets in readily accessible investments.

Here is an overview of the rules:

• the maximum amount of retirement savings that can be used to purchase a QLAC is the lesser of 25% of the account balance or $125,000, adjusted in increments of $10,000 for cost-of-living increases;