• RMD Rules for Longevity Annuities Finalized
  • July 9, 2014 | Authors: Brenna M. Clark; Adam B. Cohen; Andrea M. Gehman; Michael A. Hepburn; Paul R. Lang
  • Law Firms: Sutherland Asbill & Brennan LLP - Atlanta Office ; Sutherland Asbill & Brennan LLP - Washington Office
  • Longevity annuities are contracts that provide life annuity payments typically commencing at age 80 or 85; in many (but not all) cases, that is the only benefit the contract provides. As such, these contracts may offer cost-effective “tail risk” protection for a retirement plan participant’s decumulation strategy. However, that contract design - in particular, the economic value of the future annuity payments that are not available for distribution prior to the specified age, and the possibility of a “doughnut hole” in distributions if a plan participant’s other plan balances are exhausted prior to that age - raises questions under the required minimum distribution (RMD) rules for account balance plans, which mandate that the RMD be based on the entire account balance.