Annuities issued by American General Life Insurance Company (AGL)
All guarantees are backed by the claims-paying ability of the issuing insurance
company.
Fixed Income Annuities
American Pathway
®
Deferred Income Annuity (DIA)
Qualified Longevity Annuity Contracts (QLAC)
Introduction
AIG companies offer a range of annuities
DIA
SPIA
Index with
GLWB
VA with GLWB
INCOME LEVEL HIGHER
LOWER
Income protection
Guaranteed lifetime
income
Immediate income
Min. 13 month wait
Income with
growth potential*
Increase option
available
Increase option
available
Access to principal
Limited liquidity
available
Limited liquidity
available
charges may apply)
(Withdrawal
charges may apply)
(Withdrawal
Market participation
QLAC eligible
“Income insurance” comparison
• Subject to market conditions. Guarantees are backed by the claims-paying ability of the issuing insurance company.
Qualified Longevity Annuity Contracts (QLAC) topics
Background, overview & conditions
American Pathway DIA: QLAC vs Non-QLAC
Case studies
Prospecting and marketing tools
Quoting resources
How to do QLAC business
Background
Policymakers’ response to retirees’ concern about outliving one’s retirement savings
Historically, required minimum distributions (RMDs) generally had to begin from all
retirement accounts by age 70½
Treasury Department and the Internal Revenue Service (IRS) sought ways to provide
income at an advanced age
Overview
QLAC IRAs impact on RMDs
DIA issued as a traditional IRA can be classified as a QLAC and excluded
from RMD calculations
DIA purchasers must designate DIA as a QLAC at time of purchase
Conditions
Premiums limited to the lesser of:
–
The applicable IRS QLAC premium lifetime dollar limitation ($125,000 in 2014 subject to
IRS cost-of-living increases in future years) less premiums previously paid for any other
contract intended to be a QLAC; or,
–
25% of the aggregate account values for all traditional IRAs as of December 31 of last
year less premiums previously paid for any other IRA contract intended to be a QLAC
Income payments must begin by first of month following 85th birthday
Payment types can be single or joint, life only or life with cash refund
Pre-commencement death benefits can be either return-of-premium (ROP)
or no death benefit. ROP plus interest is not permitted
All increase options: CPI-U, 1%-5% simple, compounded or flat dollar
Commuted value and/or cash surrender value provisions not permitted
Issuers will be required to file information annually with the IRS
Premium limits – example 1
1
QLAC Maximum Premium Worksheets will be made available as a courtesy only. These examples are for
training purposes. Agents should not obtain or retain any QLAC calculations or worksheets and the
Premium limits – example 2
1
QLAC Maximum Premium Worksheets will be made available as a courtesy only. These examples are for
training purposes. Agents should not obtain or retain any QLAC calculations or worksheets and the
American Pathway Deferred Income Annuity
(DIA) –
NON-QLAC Version
American Pathway Deferred Income Annuity
(DIA) –
QLAC Version
Overview
• Premiums: $20,000 - $1,000,000
• Issue ages: NonQual/Roth 0-90; Qualified 0-69 • Deferral period: > 12 months – 40 years
• Benefit commencement: >12 months up to age 91
(maximum income start for qualified is age 70½)
• Premiums: $20,000 - $125,000 lifetime (lesser of $125,000 or 25% of aggregated IRA account values)
• Issue ages: Qualified 0-83
• Deferral period: > 12 months – 40 years
• Benefit commencement: >12 months up to age 85 (payments must begin by first day of month following 85th birthday)
Income Payment
Options
Single life, joint & survivor, or joint & contingent: lifetime income only, lifetime income with period certain, lifetime income with cash (lump sum) refund or installment refund, or period certain only
Single life, joint & survivor, or joint & contingent: lifetime income only, lifetime income with cash (lump sum) refund
Payment Increase
Options
•• Consumer Price Index (CPI-U) inflation adjustment: adjusted each January 1 after payments begin Annual payment increase: 1% to 5% on each income start date anniversary (simple or compounded interest, flat dollar increase)Death Benefit Prior to
Commencement
• Return of premium
• Return of premium + compounded interest
• No death benefit (only available on single or joint lifetime
income only options)
• Return of premium
• No death benefit (only available on single or joint lifetime income only options)
Income Start Date
Adjustment
Client can accelerate or defer the first payment date within five years of the original income start date once during the life of the annuity contract. Not available with any life only payout option.Advance Payment
Option
Once payments commence, the owner can elect a lump-sum advance of six months’ worth of payments.
This feature may be elected twice during the life of the annuity. Must be at least 59½. Only available on
nonqualified annuities with monthly payment frequency.
NA
Case studies*
DIA QLAC Case Study 1
Client profile: John
70 male
Savings (IRA) as of 12/31 prior year: $500,000
Wants to withdraw inflation-adjusted $25,000 per
year from this account
In good health and may live long
Worried about outliving assets
Wants to ensure his retirement won’t suffer from
IRA Only Income
IRA with QLAC
Desired Income
ASSUMPTIONS
IRA Beginning Balance
$ 500,000
IRA Growth Rate
5.00%
Desired Income
$ 25,000
Income Inflation Adjustment
3.00%
QLAC Premium
$ 125,000
QLAC Annuity Start Age
80
QLAC Annuity Income
$ 25,695
Market Correction @ Age 75
-10%
DIA QLAC Case Study 1: More future income, guaranteed for life
Age IRA Balance Desired Income Required Minimum Distribution (RMD) Actual Withdrawal from Account 70 $ 500,000 $ 25,000 $ 18,248 $ 25,000 71 $ 498,750 $ 25,750 $ 18,821 $ 25,750 72 $ 496,650 $ 26,523 $ 19,400 $ 26,523 73 $ 493,634 $ 27,318 $ 19,985 $ 27,318 74 $ 489,631 $ 28,138 $ 20,573 $ 28,138 75 $ 415,344 $ 28,982 $ 18,137 $ 28,982 76 $ 405,681 $ 29,851 $ 18,440 $ 29,851 77 $ 394,621 $ 30,747 $ 18,614 $ 30,747 78 $ 382,068 $ 31,669 $ 18,821 $ 31,669 79 $ 367,918 $ 32,619 $ 18,868 $ 32,619 80 $ 352,064 $ 33,598 $ 18,827 $ 33,598 81 $ 334,389 $ 34,606 $ 18,681 $ 34,606 82 $ 314,773 $ 35,644 $ 18,408 $ 35,644 83 $ 293,085 $ 36,713 $ 17,981 $ 36,713 84 $ 269,190 $ 37,815 $ 17,367 $ 37,815 85 $ 242,944 $ 38,949 $ 16,415 $ 38,949 86 $ 214,195 $ 40,118 $ 15,191 $ 40,118 87 $ 182,781 $ 41,321 $ 13,640 $ 41,321 88 $ 148,533 $ 42,561 $ 11,696 $ 42,561 89 $ 111,271 $ 43,838 $ 9,273 $ 43,838 90 $ 70,805 $ 45,153 $ 6,211 $ 45,153 91 $ 26,935 $ 46,507 $ 2,494 $ 26,935 92 $ - $ 47,903 $ - $ - 93 $ - $ 49,340 $ - $ - 94 $ - $ 50,820 $ - $ - 95 $ - $ 52,344 $ - $ - 96 $ - $ 53,915 $ - $ - 97 $ - $ 55,532 $ - $ - 98 $ - $ 57,198 $ - $ - 99 $ - $ 58,914 $ - $ - 100 $ - $ 60,682 $ - $ -
Scenario 1: IRA without QLAC
IRA Balance Desired Income QLAC Amount Desired Withdrawal Amount Required Minimum Distribution (RMD) Actual Withdrawal from Account Total Income $ 375,000 $ 25,000 $ - $ 25,000 $ 13,686 $ 25,000 $ 25,000 $ 367,500 $ 25,750 $ - $ 25,750 $ 13,868 $ 25,750 $ 25,750 $ 358,838 $ 26,523 $ - $ 26,523 $ 14,017 $ 26,523 $ 26,523 $ 348,931 $ 27,318 $ - $ 27,318 $ 14,127 $ 27,318 $ 27,318 $ 337,693 $ 28,138 $ - $ 28,138 $ 14,189 $ 28,138 $ 28,138 $ 278,600 $ 28,982 $ - $ 28,982 $ 12,166 $ 28,982 $ 28,982 $ 262,099 $ 29,851 $ - $ 29,851 $ 11,914 $ 29,851 $ 29,851 $ 243,860 $ 30,747 $ - $ 30,747 $ 11,503 $ 30,747 $ 30,747 $ 223,769 $ 31,669 $ - $ 31,669 $ 11,023 $ 31,669 $ 31,669 $ 201,705 $ 32,619 $ - $ 32,619 $ 10,344 $ 32,619 $ 32,619 $ 177,540 $ 33,598 $25,695 $ 7,903 $ 9,494 $ 9,494 $ 35,189 $ 176,448 $ 34,606 $25,695 $ 8,911 $ 9,857 $ 9,857 $ 35,552 $ 174,920 $ 35,644 $25,695 $ 9,949 $ 10,229 $ 10,229 $ 35,924 $ 172,925 $ 36,713 $25,695 $ 11,018 $ 10,609 $ 11,018 $ 36,713 $ 170,002 $ 37,815 $25,695 $ 12,120 $ 10,968 $ 12,120 $ 37,815 $ 165,776 $ 38,949 $25,695 $ 13,254 $ 11,201 $ 13,254 $ 38,949 $ 160,148 $ 40,118 $25,695 $ 14,423 $ 11,358 $ 14,423 $ 40,118 $ 153,012 $ 41,321 $25,695 $ 15,626 $ 11,419 $ 15,626 $ 41,321 $ 144,255 $ 42,561 $25,695 $ 16,866 $ 11,359 $ 16,866 $ 42,561 $ 133,759 $ 43,838 $25,695 $ 18,143 $ 11,147 $ 18,143 $ 43,838 $ 121,397 $ 45,153 $25,695 $ 19,458 $ 10,649 $ 19,458 $ 45,153 $ 107,036 $ 46,507 $25,695 $ 20,812 $ 9,911 $ 20,812 $ 46,507 $ 90,535 $ 47,903 $25,695 $ 22,208 $ 8,876 $ 22,208 $ 47,903 $ 71,744 $ 49,340 $25,695 $ 23,645 $ 7,473 $ 23,645 $ 49,340 $ 50,504 $ 50,820 $25,695 $ 25,125 $ 5,550 $ 25,125 $ 50,820 $ 26,648 $ 52,344 $25,695 $ 26,649 $ 3,099 $ 26,648 $ 52,343 $ - $ 53,915 $25,695 $ - $ - $ - $ 25,695 $ - $ 55,532 $25,695 $ - $ - $ - $ 25,695 $ - $ 57,198 $25,695 $ - $ - $ - $ 25,695 $ - $ 58,914 $25,695 $ - $ - $ - $ 25,695 $ - $ 60,682 $25,695 $ - $ - $ - $ 25,695
Scenario 2: IRA with QLAC
DIA QLAC Case Study 2
Client profile: David
70 male
Savings (IRA) as of 12/31 prior year: $500,000
Wants to withdraw inflation-adjusted $25,000
per year from this account
In good health
Wants to enjoy a long retirement without
becoming a burden on his family
IRA Only Income
IRA with QLAC
Desired Income
ASSUMPTIONS
IRA Beginning Balance
$ 500,000
IRA Growth Rate
5.00%
Desired Income
$ 25,000
Income Inflation Adjustment
3.00%
QLAC Premium
$ 125,000
QLAC Annuity Start Age
85
QLAC Annuity Income
$ 50,838
Market Correction @ Age 75
-10%
DIA QLAC Case Study 2: More future income, guaranteed for life
Age IRA Balance Desired Income Required Minimum Distribution (RMD) Actual Withdrawal from Account 70 $ 500,000 $ 25,000 $ 18,248 $ 25,000 71 $ 498,750 $ 25,750 $ 18,821 $ 25,750 72 $ 496,650 $ 26,523 $ 19,400 $ 26,523 73 $ 493,634 $ 27,318 $ 19,985 $ 27,318 74 $ 489,631 $ 28,138 $ 20,573 $ 28,138 75 $ 415,344 $ 28,982 $ 18,137 $ 28,982 76 $ 405,681 $ 29,851 $ 18,440 $ 29,851 77 $ 394,621 $ 30,747 $ 18,614 $ 30,747 78 $ 382,068 $ 31,669 $ 18,821 $ 31,669 79 $ 367,918 $ 32,619 $ 18,868 $ 32,619 80 $ 352,064 $ 33,598 $ 18,827 $ 33,598 81 $ 334,389 $ 34,606 $ 18,681 $ 34,606 82 $ 314,773 $ 35,644 $ 18,408 $ 35,644 83 $ 293,085 $ 36,713 $ 17,981 $ 36,713 84 $ 269,190 $ 37,815 $ 17,367 $ 37,815 85 $ 242,944 $ 38,949 $ 16,415 $ 38,949 86 $ 214,195 $ 40,118 $ 15,191 $ 40,118 87 $ 182,781 $ 41,321 $ 13,640 $ 41,321 88 $ 148,533 $ 42,561 $ 11,696 $ 42,561 89 $ 111,271 $ 43,838 $ 9,273 $ 43,838 90 $ 70,805 $ 45,153 $ 6,211 $ 45,153 91 $ 26,935 $ 46,507 $ 2,494 $ 26,935 92 $ - $ 47,903 $ - $ - 93 $ - $ 49,340 $ - $ - 94 $ - $ 50,820 $ - $ - 95 $ - $ 52,344 $ - $ - 96 $ - $ 53,915 $ - $ - 97 $ - $ 55,532 $ - $ - 98 $ - $ 57,198 $ - $ - 99 $ - $ 58,914 $ - $ - 100 $ - $ 60,682 $ - $ -
Scenario 1: IRA without QLAC
IRA Balance Desired Income QLAC Amount Desired Withdrawal Amount Required Minimum Distribution (RMD) Actual Withdrawal from Account Total Income $ 375,000 $ 25,000 $ - $ 25,000 $ 13,686 $ 25,000 $ 25,000 $ 367,500 $ 25,750 $ - $ 25,750 $ 13,868 $ 25,750 $ 25,750 $ 358,838 $ 26,523 $ - $ 26,523 $ 14,017 $ 26,523 $ 26,523 $ 348,931 $ 27,318 $ - $ 27,318 $ 14,127 $ 27,318 $ 27,318 $ 337,693 $ 28,138 $ - $ 28,138 $ 14,189 $ 28,138 $ 28,138 $ 278,600 $ 28,982 $ - $ 28,982 $ 12,166 $ 28,982 $ 28,982 $ 262,099 $ 29,851 $ - $ 29,851 $ 11,914 $ 29,851 $ 29,851 $ 243,860 $ 30,747 $ - $ 30,747 $ 11,503 $ 30,747 $ 30,747 $ 223,769 $ 31,669 $ - $ 31,669 $ 11,023 $ 31,669 $ 31,669 $ 201,705 $ 32,619 $ - $ 32,619 $ 10,344 $ 32,619 $ 32,619 $ 177,540 $ 33,598 $ - $ 33,598 $ 9,494 $ 33,598 $ 33,598 $ 151,139 $ 34,606 $ - $ 34,606 $ 8,444 $ 34,606 $ 34,606 $ 122,360 $ 35,644 $ - $ 35,644 $ 7,156 $ 35,644 $ 35,644 $ 91,051 $ 36,713 $ - $ 36,713 $ 5,586 $ 36,713 $ 36,713 $ 57,055 $ 37,815 $ - $ 37,815 $ 3,681 $ 37,815 $ 37,815 $ 20,202 $ 38,949 $50,838 $ - $ 1,365 $ 1,365 $ 52,203 $ 19,779 $ 40,118 $50,838 $ - $ 1,403 $ 1,403 $ 52,241 $ 19,295 $ 41,321 $50,838 $ - $ 1,440 $ 1,440 $ 52,278 $ 18,748 $ 42,561 $50,838 $ - $ 1,476 $ 1,476 $ 52,314 $ 18,135 $ 43,838 $50,838 $ - $ 1,511 $ 1,511 $ 52,349 $ 17,455 $ 45,153 $50,838 $ - $ 1,531 $ 1,531 $ 52,369 $ 16,720 $ 46,507 $50,838 $ - $ 1,548 $ 1,548 $ 52,386 $ 15,931 $ 47,903 $50,838 $ - $ 1,562 $ 1,562 $ 52,400 $ 15,087 $ 49,340 $50,838 $ - $ 1,572 $ 1,572 $ 52,410 $ 14,191 $ 50,820 $50,838 $ - $ 1,559 $ 1,559 $ 52,397 $ 13,264 $ 52,344 $50,838 $ 1,506 $ 1,542 $ 1,542 $ 52,380 $ 12,307 $ 53,915 $50,838 $ 3,077 $ 1,519 $ 3,077 $ 53,915 $ 9,692 $ 55,532 $50,838 $ 4,694 $ 1,275 $ 4,694 $ 55,532 $ 5,248 $ 57,198 $50,838 $ 6,360 $ 739 $ 5,248 $ 56,086 $ - $ 58,914 $50,838 $ - $ - $ - $ 50,838 $ - $ 60,682 $50,838 $ - $ - $ - $ 50,838
Scenario 2: IRA with QLAC
New prospecting tools for QLAC
Brochure
QLAC quoting resources – AIG National Sales Desk
Dedicated call center: 1-888-438-6933, Option 2
Email at:
[email protected]
DIA QLAC sample quotes –
American Pathway Deferred Income Annuity
Purchase Age
Annual Payout
at Age 75
Annual Payout
at Age 80
Annual Payout
at Age 85
60
19.72%
33.78%
67.14%
65
15.53%
27.09%
53.93%
70
11.80%
20.42%
40.66%
Male, $100,000 IRA, ROP death benefit, life with cash refund
Male, $100,000 IRA, no death benefit, life only
Purchase Age
Annual Payout
at Age 75
Annual Payout
at Age 80
Annual Payout
at Age 85
60
15.86%
25.41%
46.01%
65
12.44%
20.05%
35.68%
70
9.64%
15.08%
25.99%
In exchange for higher income, deferred income annuities permanently convert principal into
a guaranteed payment stream. Annual payout is a percentage of the purchase price paid out
each full year and includes both interest and return of principal. It is not an interest rate.
How to do business – SPIA and DIA
Complete the SPIA/DIA product specific training
–
Quest CE
https://learn.questce.com/naicsuitability
Obtain QLAC quotes from your AIG Internal Wholesaler
(888-438-6933, Option 2)
Application kits (and the QLAC Election Form) can be
obtained on Forms Depot
Submit a completed QLAC Election Form and copy of
the quote with application paperwork
Access QLAC marketing pieces on playbook:
www.aig.com/diaplaybook
Do not calculate premium limits or obtain or retain a
Questions ?
AIG Annuity Sales Desk
Tax-qualified contracts such as IRAs, 401(k)s, etc., are tax deferred regardless of whether or not they are funded with an annuity. If you are considering funding a tax-qualified retirement plan with an annuity, you should know that an annuity does not provide any additional tax-deferred treatment of earnings beyond the treatment by the tax-qualified retirement plan itself. However, annuities do provide other features and benefits such as income options.
This information is general in nature and may be subject to change. American General Life Insurance Company, its agents and representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your situation, consult your professional attorney, tax advisor or accountant.
Annuities issued by American General Life Insurance Company (AGL).
Guarantees are backed by the claims-paying ability of American General Life Insurance Company.
Issuing company AGL is responsible for financial obligations of insurance products and is a member of American International Group, Inc. (AIG).
American General Life Insurance Company
2727-A Allen Parkway Houston, Texas 77019
© 2014 American International Group, Inc. (AIG). All rights reserved. AGLC108229 (10/2014) J94327
AGLC106230, AGLC106377, AGLC106378, ICC14:QLAC, DIA-ISDC-413 May not be available in all states and product features
