Annuities Flashcards
What is the 403(b) Plan?
The 403(b) Plan is a retirement plan for certain employees of public schools, employees of specific tax-exempt organizations, and certain ministers.
What is the 1035 Contract Exchange?
1035 Contract Exchange applies to annuities. If an annuity is exchanged for another annuity, a “gain” (for tax purposes) is not realized. This is also true for a life insurance policy or an endowment contract exchanged for an annuity. However, an annuity cannot be exchanged for a life insurance policy. This provision in the tax code allows you, as a policyholder, to transfer funds from a life insurance, endowment, or annuity to a new policy, without having to pay taxes.
What is the Accumulation Period?
The Accumulation Period is when the premiums an annuitant pays into annuities are credited as accumulation units. The accumulation period may continue between the time after premiums have ceased, but the payout has not yet begun. At the end of the accumulation period, accumulation units are converted to annuity units.
What are Accumulation Units?
Accumulation Units make up the value of contributions made by the annuitant less a deduction for expenses. The value of each accumulation unit is a credit to the individual’s account and varies depending on the value of the underlying stock investment.
What is an Annuitant?
An Annuitant is one to whom an annuity is payable or a person upon the continuance of whose life further payment depends.
What are Annuity Units?
Annuity Units are the converted accumulation units once variable annuity benefits are to be paid out to the annuitant. At the time of the initial payout, the annuity unit calculation is made. From then on, the number of annuity units remains the same for that annuitant.
What is the Cash Refund Option?
The Cash refund option provides that, upon the death of an annuitant before payments totaling the purchase price have been made, the excess of the amount paid by the purchaser over the total annuity payments received will be paid in one sum to designated beneficiaries.
What are Deferred Annuities?
Deferred annuities provide for postponement of the payment of an annuity until after a specified period or until the annuitant attains a specified age. May be purchased on either a single-premium or flexible premium basis. Deferred annuities typically do not begin making income payments for at least one year after the date of purchase.
What are Equity Indexed Annuities?
Equity indexed annuities are a fixed deferred annuity that offers the traditional guaranteed minimum interest rate and an excess interest feature that is based on the performance of an external equities market index.
What is the Exclusion Ratio?
The Exclusion ratio is a fraction used to determine the amount of annual annuity income exempt from federal income tax. The exclusion ratio is the total contribution or Investment in the annuity divided by the expected ratio.
What are Fixed Annuities?
Fixed annuities provide a guaranteed rate of return. The interest payable for any given year is declared in advance by the insurer and is guaranteed to be no less than a minimum specified in the contract. With fixed annuities, the investment risk is on the insurer.
What are Immediate Annuities?
Immediate annuities provide for payment of an annuity benefit at one payment interval from the date of purchase. Immediate annuities can only be purchased with a single payment. Immediate annuities typically begin paying income within one month of purchase.
