Leaderboard

Sorry, but there is no question here: they must be reported. I remember when that exclusion was written; it was for GUARANTEES (that is: annuities), not life insurance. PERIOD. A life insurance contract DOES NOT guarantee to pay a specific BENEFIT (RETIREMENT BENEFIT) at a future date. Besides, from a logical standpoint there is a reason why they specifically excluded REAL ANNUITIES and that logic does not apply to a life insurance contract.

I think in theory the IRS would apply the basis recovery rules under Section 72 and you could have had some of the basis already coming out, it was just not reported.

I think Bird is correct, only paid up allocated annuity contracts are excluded.

This is a debate that goes back at least 30 years. The form instructions are clear for unallocated contracts and contracts that guarantee a specific benefit. But as Bird notes this is not what most policies do, and on all these other policies the instructions are silent. I don't really care if they have to be reported or not, I would just like DOL to state whichever it wants clearly in the instructions, so we can put this to bed and argue about other stuff, like amending safe harbor plans! ?

I believe 100% that they should be reported. The operative words are "guarantees...to pay a specific dollar benefit at a future date." They don't! I believe this section is referring to annuities that are purchased to provide specific benefits (and/or maybe insurance policies in DBs fully funded with insurance). I've seen otherwise very knowledgeable TPAs exclude them (you have to consider the premiums as "expenses" which I find ridiculous) so I guess you could say there are differing viewpoints, although I'd have to say those other viewpoints are wrong.

Sounds like loan defaulted in second calendar quarter, so cure period ended 9/30/2018. Because he/she terminated, employer probably must under plan to do a loan offset (i.e., an actual) distribution of unpaid loan balance, rather than a "deemed." Participant will get 1099-R showing loan offset distribution, coded as such. If he/she rolls over that amount to an IRA by due date of tax return, then can claim rollover on 1040. That's the way the TCJA changes work.

Class year vesting was eliminated a long time ago - there was a discussion on that here within the last month or so. The only way to do that would be to adopt a brand new plan every year and exclude service before the plan's effective date, but 4-year cliff still wouldn't be permitted, and I'm sure IRS would have big issues with this when they caught up with you anyway.