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Purchase or distribution of annuity to annuitant/participant in Plan Termination


Dalai Pookah
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A defined benefit plan purchased an annuity from Prudential for one of its participants. The plan is terminating and the participant is willing to either take a distribution or purchase the annuity from the plan. The annuity has a Highest Daily Lifetime 6 Plus Rider, which Prudential is saying will terminate if the annuity is transferred to the annuitant. this rider provides the major value of the annuity. Examining the rider, there is nothing to indicate that a transfer to the annuitant is not allowed.

I have little experience analyzing these annuities, but it does not make sense that an annuity sold to a qualified plan would have provisions negating its provisions if the ownership of the annuity is changed from the Plan to the annuitant. This is what we expect would happen either upon termination of employment or termination of the Plan.

Prudential is being opaque. They keep saying the transfer will not be allowed to maintain the rider, but will not offer language in the rider (or elsewhere) that supports this assertion. Can anyone offer insight and guidance here?

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