Restricted IRA is invested in annuity

[katieinny]

In order for an HCE to take a lump sum from his employer's DB plan, he was required to invest 125% of the distribution amount in a restricted IRA. There is a Security Agreement in place. He invested the assets in a variable annuity. The financial institution is both the owner and the beneficiary of the annuity. The participant is the annuitant. This took place about 3 years ago. Now, we're trying to determine what options are available to him if he wants to get out of this annuity (understanding that the Restricted IRA provisions must remain in effect wherever he invests). Paying the surrender charge will be the first deterrent, but if he decides to bite the bullet, the Security Agreement says that the DB Plan Administrator and the Participant can agree on a successor custodian or trustee and provide the current financial institution with transfer instructions.

The original investment representative is now out of the picture, and the replacement rep doesn't seem to understand what this Restricted IRA is. I'm hoping that the fact that the institution is the owner and beneficiary under this annuity won't cause a problem. Any thoughts from those of you who have run into this type of arrangement before? I don't see any problem with the Restricted IRA itself -- I'm just not sure that an annuity was the way to go.