§8434 Annuities: Methods of Payment; Election; Purchase

Summary

The Board decides the ways annuity payments can be made. Options include a monthly payment just for the annuitant while they live; a joint monthly payment for the annuitant and spouse with a survivor payment to whoever lives longer; versions of the single or joint plans that include automatic increases so the yearly amount never falls below the previous year; and a joint option that can name a former spouse or someone with an insurable interest to receive survivor payments. Subject to section 8435(b) and rules from the Executive Director, a person who chooses an annuity must pick one of these payment methods when the annuity contract is bought. If a payment method is removed less than 5 years before an annuity starts, the person can still choose that removed method. Not earlier than 90 days (or a shorter time the Executive Director allows) before the annuity starts, the Executive Director must use the annuitant’s account balance to buy an annuity contract from a company that sells annuities. The contract must follow the law’s rules, include protections the Executive Director requires, and the seller must provide a bond or proof of financial responsibility. States, the District of Columbia, Puerto Rico, and their local governments may not tax the amount used to buy the annuity contract, but an issuing company can still be taxed on its net income from the sale if that tax applies broadly to business activity.