Description: This article discusses the guidance provided in IRS Notice 2022-6 and prior guidance on whether distributions from an individual account under a qualified retirement plan satisfy the exception to the 10 percent additional tax in Internal Revenue Code section 72(t) for certain substantially equal periodic payments.

Description: This article provides a basic introduction to the taxation of qualified annuities held in qualified retirement plans and IRAs. The article has been updated for the SECURE Act and the SECURE 2.0 Act. The article describes the basic types of employer-based plans, provides of overview of the taxation of contributions and benefits when annuities are held in connection with plans and IRAs, explains the required minimum distribution rules, and offers a brief introduction to recent legislation impacting qualified annuities.

Description: Actuaries can be well suited to provide consulting to both DB and DC plans. We focus on DC design and the important nondiscrimination test requirements that need to be at the core of a plan design project. Plan design for DC plans seems easy, but should not be looked at any less seriously than DB plan design. The key steps are the same as DB plan design. We review key concepts that plan design actuaries want to know.

Description: The article describes the factors that should determine the asset allocation of an employer's QDIA, especially Target Date Funds, and suggests that in general QDIAs have insufficient equity in retirement asset allocations.

Description: In this session at the SOA 2003 Washington, DC Spring Meeting, the panelists discuss the value of deferred taxes to the owner of an IRA, 401k or similar product. The time it takes for tax-deferral benefits to overcome typical penalties levied on early distributions is reviewed. They also discuss the effect of tax deferral on the risk profile of investments.

Description: Many retirement actuaries have experience developing, implementing, and monitoring Liability Driven Investing (LDI) strategies for plan sponsors. These strategies typically involve modifying a plan’s investment strategy to remove a significant portion of the investment and interest rate risk now or at some point in the future when specific triggers are met. The tactics often involve the use of fixed income assets to cash flow and/or duration match the liabilities. In the spirit of helping actuaries expand their roles in an evolving defined contribution world, this article explores the application of LDI and derisking strategies within defined contribution and individual retirement accounts. The economic theory behind this approach is called the lifecycle hypothesis, or lifecycle finance. The benefits of the lifecycle finance method are that it provides a safe approach to save for retirement and a secure source of floor income during retirement. Similar to pension plans, each individual has his or her own idiosyncratic needs, wants, and risks that should be considered. Actuaries are uniquely situated to help defined contribution plan sponsors, individuals, and even themselves implement the lifecycle finance approach by developing and distributing tools and methods that focus on income (rather than wealth), LDI strategies, and personalization.

Description: This article, another in the popular series devoted to tax basics, provides an overview of how the Employee Retirement Income Security Act of 1974 (ERISA), the law governing employment-based retirement and health plans, impacts the use of annuities in pension and 401(k) plans. The article explains which types of plans are subject to ERISA, and which are not; why the concept of "plan assets" is critical; what duties an insurance company or distributor might take on when an annuity is placed with a retirement plan; and finally what disclosures may be required. The article also includes a brief introduction to terminal funding annuities. This article is intended for those with no prior experience in ERISA. Because the vast majority of retirement assets are saved originally in employment based plans like pension and 401(k) plans, understanding the basics of ERISA is important for anyone who will have a career in annuities and life insurance.