On February 3, 2012, the IRS issued a proposed
regulation1 that would encourage the use of longevity
annuity contracts under 401(k), 403(b), and other defined
contribution retirement plans, as well as governmental 457(b)
plans. The regulation would exempt certain such contracts from
requirements of the Internal Revenue Code (the "Code")
that might otherwise prevent them from operating as
intended.2 The regulation is one of several recent IRS
pronouncements that are designed to help retirees deal with the
risk of running out of money by facilitating their use of products
that pay lifetime income benefits.
Longevity annuity contracts pay retirees a lifelong stream of
income commencing at an advanced age, if the retiree lives to that
age. Accordingly, they are a potentially valuable tool to help
retirees protect themselves against the risk of exhausting their
retirement savings while still alive.
