QLACs have certain attributes that make them different from other types of annuities.
Under the IRS rules, a QLAC must have the following attributes:
- The annuity must be deferred and not be an immediate annuity;
- Once payments begin, the annuity is for the remainder of the beneficiary’s life;
- The annuity must start no later than the owner’s 85th birthday;
- The policy must be a “general account” insurance product – not variable;
- The owner and a spouse may be joint beneficiaries; and
- The maximum QLAC premium is the lesser of $135,000 or 25% of Plan assets.
- After issuance, the QLAC cannot be traded or sold. The contract has no cash surrender value. This frees the QLAC issuing carrier from the risk that the contract might be terminated at any point in time.