Annuities and RMD

[don321]

I have a 403b retirement plan. One item in it is qualified annuity. I have now annuitized the annuity (two life, 20 year guarantee). According to the Secure Act 2.0 (2023), I can use the annuity payments to help satisfy all of the RMD requirements for the full 403b plan. How do I calculate the value of the annuity at the end of the year? (I can easily calculate the RMD using this information).

      According to the Secure Act 2.0, the "Treasury Secretary is to update the relevant regulations accordingly", and "until such time as  actions are taken taxpayers may rely on their reasonable good faith interpretations of this section." The annuity company says they won't compute the value of the annuity at the end of each year until the regulations are released by the IRS.

     Will Turbo Tax do this calculation for me? IRS Publication 1457 gives a method for calculating the value of an annuity "for use in income, estate, and gift tax purposes". In this case, it would seem reasonable to use this calculation as if the owner died at the end of the year.

    Final question: the annuity payments are reported each year, and I pay taxes on all of the income because it was funded with pre-tax dollars. Is the annuity still considered to be "in the 403b plan"?

[LoriLeighEA]

Welcome to the Event, don321!

You have definitely done your research!

TurboTax does not do calculations for you, however, here is a good site to use for that purpose:

How to Calculate the Present and Future Value of Annuities 

403(b) choices are limited to annuities and mutual funds - so your annuity would be considered part of your 

403(b) plan.  

The IRS does go into more detail here: 403(b) Retirement Plans 

[don321]

The first link gives a calculation, but it depends on knowing an "interest rate". There is no interest rate that I am aware of that is associated with the annuity, so I cannot do this calculation.

The second link you provided has a list of FAQ, none of which seem to address this problem. Can you be more specific?

For my last question, about whether or not the annuity is still considered to be "in plan" is that the insurance company website lists my balance as $0. They took out the funds when I annuitized. 

[dmertz]

"The annuity company says they won't compute the value of the annuity at the end of each year until the regulations are released by the IRS."

Without a year-end value, there is no way to determine by how much of the annuity payout exceed the RMD requirement of the annuity, so no way to know how much of RMD for the remainder of your 403(b) balance is satisfied by the annuity payout.

As to whether the annuity is still part of your 403(b) with payouts eligible to satisfy some of the RMD for the rest of the balance in your 403(b), it's possible, but that's a question for your 403(b) plan administrator.