IRS Allows For Annuity Payout Amendments

March 8, 2004 ( - The US Internal Revenue Service (IRS) has provided flexibility to non-qualified annuity policyholders taking distributions under age 59½.

>Those non-qualified annuitants age 59½ or younger receiving annuity payments can now meet with their insurer to restructure the payment plan, the IRS said in Notice 2004-15.   Thus, annuitants are now able to restructure their payment plans as market conditions change, according to a news release issued by the American Council of Life Insurers (ACLI).  

>Prior to Notice 2004-15, non-qualified annuitants under the age of 59½ had only one opportunity to establish their payment schedule, a schedule that was based on their expected mortality and the accumulated amount in the contract. Had this group restructured their payout schedules under the previous regime, they would have been slapped with a 10% federal income tax penalty for “early withdrawals.”

“This IRS guidance extends to owners of non-qualified annuities the same tax treatment to people receiving annuity payments from their qualified annuities,” said Laurie Lewis, ACLI Vice President & and Chief Counsel, Federal Taxes.

The IRS’ notice can be found at .