annuity help please

[Tom Poje]

participant in DB and DC

decided to take annuity.

so they can set something up at the bank.

Should that be under the person name, or under a 'trust' at the bank.

I think they have to keep things separately. the DB is simply an annuity and must be funded if needed if the lady lives longs enough.

the DC was a money purchase, and should simply be an annuity based on whatever was the balance.

[ESOP Guy]

Can't speak to the DB plan.

I have exactly once seen a MPP plan where the person wanted an annuity and wanted it as the benefit from the plan. The MPP plan bought an annuity from an insurance company with the balance in her account and that became her benefit. The annuity was still owned by the MPP trust but that allowed the plan to pay for the rest of her life and know it would have enough money. Any other plan that promises a life annuity one risks runnig out of money in the person's account before they die and then where do the funds come from? I must admit given less thought but what happens if the plan has promise a life annuity and just used the balance to fund it what happend if that person dies before the money is gone? It was a life annuity benefit so the beneficiaries aren't due the money.

[John Feldt ERPA CPC QPA]

The participant elected to have their DB benefit paid as an annuity. The plan document has a formula that specifically defines the benefit amounts payable under that form, so once the benefit election is complete, the plan pays that benefit as elected from the plan assets.

Alternatively, the plan fiduciaries could use plan assets to purchase that annuity from an insurance company, thereby removing that liability from the plan. It may very well cost much, much more to do that than the amount that was being funded into the plan (unless the actuary knew what the participant was going to elect). That will depend on the annuity quotes you get back, the type of annuity selected, and the actuarial equivalence definition used in the plan to determine the amounts payable under that elected form of payment.

[david rigby]

Tom, I've read your question much differently than implied by either of the above answers.

Can you rephrase? For example, who is "they"? Which plan are you talking about? etc.

[Tom Poje]

perhaps I will know more later this week and can tell you how this will all play out. supposedly someone else in the office is going to handle things.

I'm trying to make sure things are handled properly, but unless you get the ball rolling..

[Bird]

perhaps I will know more later this week and can tell you how this will all play out. supposedly someone else in the office is going to handle things.

I'm trying to make sure things are handled properly, but unless you get the ball rolling..

Somehow I doubt the bank is setting up a true annuity payment, especially from the DC plan - what assumptions are they using? Unless it's a very large plan that does this routinely, I wouldn't think a bank would be handling this for the DB either.

Once or possibly twice we bought an annuity from an insurance company to provide a true lifetime annuity benefit.