In November 2020, the IRS issued regulations that included updated Life Expectancy Tables used for calculating Required Minimum Distributions (RMDs). The new tables are effective for 2022 RMDs. The life expectancy tables and applicable distribution period tables in the regulations generally reflect longer life expectancies. For example:

• A 72-year-old IRA owner who applied the Uniform Lifetime Table under 2021 applicable rules to calculate a 2021 RMD, used a life expectancy of 25.6 years. Under the updated rules, a 72-year-old IRA owner will use a life expectancy of 27.4 years to calculate a 2022 RMD.
  
  
• A 75-year-old surviving spouse who is a sole beneficiary and applied the Single Life Table under 2021 applicable rules to calculate a 2021 RMD, used a life expectancy of 13.4 years. Under the updated rules, a 75-year-old surviving spouse who is a sole beneficiary will use a life expectancy of 14.8 years to calculate a 2022 RMD.

The effect of these changes is to reduce required minimum distributions generally, which will allow individuals to retain larger amounts in their retirement plans to account for the possibility they may live longer.

Fidelity systems were updated in early January to reflect the new Life Expectancy Tables. Any RMD and life expectancy estimates that are calculated by Fidelity are being calculated using the new tables effective for 2022 RMDs.

For inherited IRA/retirement accounts, also referred to as Beneficiary Distribution Accounts or BDAs, Fidelity does not provide RMD calculation services. A beneficiary who wishes to establish a periodic distribution plan to satisfy their RMD has the option to establish a plan that will pay distributions based on their or another beneficiary’s life expectancy, as applicable.

• For beneficiaries who choose their own life expectancy for determining their RMD, a Life Expectancy Plan is established. These Life Expectancy Plans have been automatically updated to calculate the payments based on the new tables.
  
  
• For beneficiaries who choose another beneficiary’s life expectancy for determining their RMD, a Fixed Period Plan is established using the life expectancy factor that is in effect at the time it is established. Fixed Period Plans will not be automatically updated in 2022 or beyond. These beneficiaries may want to review their Fixed Periodic Plans with their investment or tax advisor to determine whether or not to update their plan using the 2022 life expectancy factors. If the client decided they wish to update one of these plans, please obtain a letter of instruction or client email and forward to Brokerage Operations for processing.

Please contact 1-800-344-7437 with any questions.

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With the implementation of Regulation Best Interest, ESI is reminding reps that the use of annuities within qualified accounts is generally limited to (click links for approved list):

• Indexed Annuities
• Registered Indexed Linked Annuities (RILA, aka Hybrid Variable Annuities)
• Variable Annuities with Living Benefit riders (income or accumulation)

In certain circumstances variable annuities without living benefit riders will be considered for qualified accounts if the following conditions are satisfied as outlined in FN 2018-12:

• The annuity will provide a leveraged or enhanced death benefit over the contract premium.  Return of premium, contract value only, or potential step-up only death benefits are generally not eligible; there must be a roll-up feature.
• The annuitant is age 60 or older.
• The annuitant is uninsurable or heavily rated, making life insurance unavailable or cost prohibitive.
• The annuitant’s primary goal is for the annuity is to transfer maximum assets to their beneficiaries.
• The premiums should not be needed for living expenses, and only accessed in the event of an emergency.

The use of variable annuities without income riders or leveraged death benefit riders (as described above) would be considered investment-only variable annuities which are only permitted in non-qualified accounts. 

Existing Annuities in Qualified Accounts

Investment-only variable annuities in qualified accounts that were established prior to 6/10/2017 are permitted to make additional investments, however since the investment strategy may be replicated with other lower cost and/or more liquid investments options, such as mutual funds, consideration should be given to utilizing those other options.

QUESTIONS

If you have any questions, please contact your supervisor or ESI Suitability at 800-344-7437.

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