Annuities Flashcards
Retirement plan for certain employees of public schools, employees of specific tax-exempt organizations, and certain ministers
403(b) Plans
If an annuity is exchanged for another annuity, a gain is not realized. Same with life insurance policies and endowment contracts exchanged for annuities. Annuities cannot be exchanged to life insurance policies.
1035 Contract Exchange
When the premiums an annuitant pays into annuities are credited as accumulation units. Will continue after premiums have ceased and before payout begins. Accumulation units are converted to annuity units
Accumulation Period
Make up the value of contributions made by the annuitant less a deduction for expenses. Values depend on the value of the underlying stock investments
Accumulation Units
Whom the annuity is payable or person upon the continuance of whose life further payment depends
Annuitant
Converted accumulation units once variable annuity benefits are to be paid out to the annuitant.
Annuity Units
Provides that, upon 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 lump sum to the designated beneficiary.
Cash Refund Option
Provide for postponement of the payment of an annuity until after a specified period or until the annuitant attains a specific age. Do not begin making income payments for at least one year after the date of purchase
Deferred Annuity
Fixed deferred annuities that offer the traditional guaranteed minimum interest rate and an excess interest feature that is based on the performance of an external equities market index
Equity Indexed Annuity
Fraction used to determine the amount of annual annuity income exemption from federal income tax.
Total contributions or investments in the annuity/expected ratio
Exclusion Ratio
Provides a guaranteed rate of return. Interest payable for any given year is declared in advance by the insurer and is guaranteed to be no less than the minimum specified in the contract. Investment risk is on the insurer.
Fixed Annuity
Payment of an annuity benefit at one payment interval from the date of purchase. Can be purchases with a single payment. Typically begin paying within a year.
Immediate Annuity
Payment of an annuity to two people. If either person dies, the same income payments continue to the survivor for life. When they die, no further payments will continue.
Options: 2/3 and 1/2
Joint Life and Survivor Option
Designed to pay the annuitant an income for life, but guarantees a definitive minimum period of payments. If the annuitant dies, the beneficiary will continue to receive payments for the remainder of that period.
Life with Period Certain Annuity (Life Income with Term-Certain Option)
Can be attached to a deferred annuity that feature fixed on interest rate guarantees combined with an interest rate adjustment factor that can cause the actual crediting rate to increase or decrease in response to market conditions
Market Value Adjustment (MVA)
