changing ownership on annuity

[jkdoll2]

We have a DB plan where the asset is an annuity. The plan in terminating and they just want to reregister the annuity into the participants name. The insurance company says this is not a taxable event. I would think that it is - because it is changing ownership from the Plan name to the participants name. It is NOT going to an IRA. This doesnt qualify for a 1035 exchange - correct?

Thanks

[Bird]

Well, the easy thing to do is to make an Individual Retirement Annuity and not have this be an issue - why isn't it an IRA?

Having said that, I think you can (still) buy (or in this case retitle) a Tax Qualified Annuity, where the transfer from plan to annuity is not a taxable event. This used to be done commonly before IRA rollovers were generally allowed. (Hard to believe that hasn't always been the case.)

As long as the ins co properly codes it with 0 basis they will make all distributions as taxable events.

[masteff]

Key term: qualified plan distributed annuity contract

See Reg 1.402(a)-1(a)(2) which is the basis for the DOL's statement in this comment letter that: "A qualified plan distributed annuity contract is an annuity contract that has been distributed from the plan and that remains tax-deferred even though it is not part of the plan and not part of an IRA."