481. What is a longevity annuity?Stevenrcline202015-04-28T18:21:00Z2015-04-28T18:21:00Z22871641Summit Business Media133192514Site Map/Annuities/Nonqualified/Amounts Received as an Annuity/Variable Annuitiesvariable annuity2005-01-24T00:00:00ZTaxFactsDefaultArticleSite Map/Annuities/Quick Clicks/Variable Annuity10025-00-TF1.xml25.00;#1577;#1597;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1What is a “wraparound” or “investment” annuity? How is the owner taxed prior to the annuity starting date?1280118600.000000000TaxFactsDefaultArticleSBMEDIA\cjump2010-01-27T13:15:29Z481. What is a longevity annuity?A longevity annuity, also known as a “Deferred Income Annuity” (DIA), is an annuity contract designed solely to provide income at advanced ages. It is purchased well before the Annuity Starting Date (ASD) and the amount of the annuity payments is guaranteed at the time of purchase. In some contracts, only one lump sum premium may be made, the ASD is set at the time of purchase (often, age 85) and cannot be changed and there is no death benefit or surrender value prior to ASD. In others, recurring premiums are accepted, the ASD may be changed (within limits) and there is a pre-ASD death benefit.All longevity annuities provide considerable leverage (the difference between the premiums paid and the annuity benefit; those without a pre-ASD death benefit provide much more leverage.When these contracts first appeared the “pure” version (with no pre-ASD death benefit and an ASD fixed at an advanced age) was very popular. Today, more flexible contracts are more popular.The IRS has issued a private letter ruling explaining the tax treatment of a so-called longevity annuity..Let. Rul. 200939018. According to the IRS, a longevity annuity qualifies for favorable treatment, which means payments are taxed under the exclusion ratio rules when they begin.This treatment applies as long as, on the deferral period end date, the contract’s contingent account value becomes the cash value and is accessible by the owner through: (1)the right to receive annuity payments at guaranteed rates, (2)the right to surrender the contract for its cash value, (3)the right to take partial withdrawals of the cash value, and (4)a death benefit.The IRS concluded that a longevity annuity is an annuity contract for purposes of IRC Section 72 because the contract is in accordance with the customary practice of life insurance companies and the contract does not make periodic payments of interest.