Annuitizing an account in a 457 plan

[Guest DeanT]

My question relates to annuities inside a Non-governmental 457(f) plan. I am trying to understand the mechanics of having a client annuitize their current 457(f) annuity. Should the tax statements and payment be sent to the client or the Plan on behalf of the client?

My understanding is that the annuity is taken out of the plan ownerhip and put into the client's ownerhip when the account is annuitized. The payment and applicable tax statement would be sent to the client (annuitant), not the plan.

[mbozek]

The transfer of the annuity contract to the participant will result in immediate taxation of the FMV of the annuity to the participant because the participant will be come the ownerunder IRC 72. The only other option is to pay periodic benefits to the participant under the rules for IRC 401(a)(9).