Minnesota Life INDIVIDUAL RETIREMENT ANNUITY
(XXX) AGREEMENT
SEP, TRADITIONAL XXX AND XXXX-XXX
WHAT DOES THIS AGREEMENT PROVIDE?
This agreement modifies the contract. Provisions are changed before issue. In
the event of a conflict between the provisions of this agreement and the
contract to which it is attached, the provisions of this agreement will control.
These changes will allow its use: (a) with a Simplified Employee Pension
(herein "SEP"); and/or (b) as a Traditional Individual Retirement Annuity under
the Employee Retirement Income Security Act of 1974, as amended (herein "XXX");
and/or (c) as a Xxxx Individual Retirement Annuity under section 408A of the
Internal Revenue Code (herein "Xxxx-XXX"). The provisions that apply for
Traditional IRAs generally apply for SEPs, unless otherwise stated.
PURCHASE PAYMENTS
ARE TRADITIONAL XXX PURCHASE PAYMENTS LIMITED?
Yes. Where the annuitant has an XXX, purchase payments may be limited. An
annual cash purchase payment may not exceed the lesser of: (a) the amount of
compensation includible in gross income in any taxable year; or (b) $2,000, or
such other maximum amount as may be allowed by law.
Where an annuitant establishes an XXX along with a lower earning spouse,
purchase payments may be limited. They are also limited if the annuitant is the
lower earning spouse. The cash purchase payments for both annuities and
accounts must then be considered together. They may not exceed the lesser of:
(a) the amount of compensation includible in the working spouse's compensation
includible in gross income in any taxable year; or (b) $4,000, or such other
maximum amount as may be allowed by law. In no event may an annuitant's annual
purchase payment exceed the cash amount of: (a) $2,000; or (b) the maximum
annual contribution allowed for an XXX.
The annuitant's employer may make purchase payments under the annuitant's SEP up
to the lesser of 15% of the annuitant's compensation (exclusive of compensation
in excess of $160,000) or $30,000. Other limits will apply if the annuitant's
XXX is used as part of a salary reduction SEP.
The annuitant, or the annuitant and his or her employer, are responsible for
determining the maximum purchase payments that may be made to an XXX.
ARE XXXX-XXX PURCHASE PAYMENTS LIMITED?
Yes. Where the annuitant has a Xxxx-XXX, purchase payments may be limited.
Annual purchase payments for all IRAs maintained by the annuitant may not exceed
the lesser of 100% of the annuitant's compensation includible in gross income in
any taxable year or $2,000. The maximum purchase payment that an annuitant may
make to a Xxxx-XXX will depend on the amount of the annuitant's income. The
maximum annual purchase payment allowed for a Xxxx-XXX is gradually reduced to
$0 between certain levels of Adjusted Gross Income ("AGI"). Adjusted gross
income is defined in section 408A(c)(3) of the Code and does not include amounts
transferred or rolled over to Traditional IRAs or Xxxx-IRAs. In accordance with
section 408A(c)(3) of the Code, if an annuitant is single, the $2,000 limit is
phased out between AGI of $95,000 and $110,000; if an annuitant is married and
files a joint federal income tax return, it is phased out between $150,000 and
$160,000; and if an annuitant is married and
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files a separate federal income tax return, it is phased out between $0 and
$10,000.
If an annuitant is married, the maximum purchase payment to the lower-earning
spouse's Spousal Xxxx-XXX may not exceed the lesser of: (a) 100% of both
spouses' combined compensation minus any Xxxx-XXX or deductible Traditional XXX
contribution for the spouse with the higher compensation; or (b) $2,000. A
maximum of $4,000 may be contributed to both spouses' Spousal Xxxx-IRAs.
Purchase payments can be divided between the spouses' IRAs as the annuitant and
his spouse wish, but annual purchase payments to either one of the IRAs may not
exceed $2,000.
DO PURCHASE PAYMENT LIMITATIONS APPLY TO A ROLLOVER TO A XXXX-XXX?
No. However, some individuals are not eligible to make rollover purchase
payments to a Xxxx-XXX.
A qualified rollover is a rollover contribution from another Xxxx-XXX or
Traditional individual retirement account or annuity in accordance with sections
408(d)(3), 408A(c)(3)(B), 408A(c)(6) and 408A(e) of the Code. A cash purchase
payment may be the amount received by or on behalf of the annuitant as all or
any portion of a distribution which is a rollover contribution. The
distribution may be one from a Traditional XXX or Xxxx-XXX, but may not be an
eligible rollover distribution from a tax-exempt employee's trust or a qualified
employee annuity plan.
A rollover or transfer from a Traditional XXX to a Xxxx-XXX will not be
permitted if the annuitant's AGI for the tax year exceeds $100,000 or if the
annuitant is married and files a separate federal income tax return. A rollover
contribution must be received by us not later than 60 days after the annuitant
receives it.
DO PURCHASE PAYMENT LIMITATIONS APPLY TO A ROLLOVER?
No. Limits on purchase payments to the contract do not apply with a rollover
contribution. A rollover contribution is one within the meaning of sections
408(d)(3), 402(c), 403(a)(4), 403(b)(8), 408A(c)(3)(B), 408A(c)(6), 408A(d)(3)
or 408A(e) of the Internal Revenue Code (herein "Code") or a purchase payment
made in accordance with the terms of a SEP as described in section 408(k) of the
Code. In that case, a cash purchase payment may be the amount received by or on
behalf of an annuitant as all or any portion of a distribution which is a
rollover contribution. The distribution may be one from an individual
retirement account, annuity or bond plan; or an eligible rollover distribution
from a tax-exempt employee's trust; a qualified employee annuity plan; or such
other plan as may be allowed by law. A Xxxx-XXX, however, may not receive a
rollover contribution directly from any plan other than a Traditional XXX or
another Xxxx-XXX. In addition, a rollover or transfer from a Traditional XXX to
a Xxxx-XXX will not be permitted if the annuitant's AGI for the tax year exceeds
$100,000; or if the annuitant is married and files a separate federal income tax
return. A rollover contribution must be received by us not later than 60 days
after the annuitant receives it. A direct rollover payment may be made to us
from the plan making the distribution. A purchase payment may not include
contributions to a tax-qualified plan made by the annuitant as an employee.
MAY THE ANNUITANT ALWAYS MAKE PURCHASE PAYMENTS?
No. We will not accept purchase payments under this contract as of a date the
annuitant is not eligible for a SEP, XXX or Xxxx-XXX.
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In addition, no additional cash contributions or rollover contributions may be
accepted under the contract if: (a) the owner dies before the distribution of
the entire interest in the contract; and (b) the beneficiary is not the
surviving spouse.
Purchase payments which exceed those allowed for an XXX or Xxxx-XXX may be
returned. We will send them to the annuitant. Return is without regard to the
provisions of this contract dealing with withdrawals. Excess purchase payments
to a SEP may similarly be returned. We will send them to the payer.
The annuitant has the sole responsibility for determining whether any purchase
payments meet applicable income tax requirements.
DISTRIBUTION PROVISIONS
ARE THERE RULES FOR THE TIMING OF DISTRIBUTIONS FROM AN XXX?
Yes. The distribution of an annuitant's value shall be made in accordance with
the minimum distribution requirements of section 408(b)(3) of the Code and the
regulations thereunder, including the incidental death benefit provisions of
section 1.401(a)(9)-2 of the proposed regulations. All of these rules are
incorporated herein by reference.
The annuitant's accumulation value, or withdrawal value if applicable, must be
distributed or begin to be distributed, by the annuitant's required beginning
date. This is the April 1 following the calendar year in which the annuitant
reaches age 70 1/2. For each succeeding year, a distribution must be made on or
before December 31.
The annuitant or, if applicable, the annuitant's beneficiary, is responsible for
assuring that the required minimum distribution is taken in a timely manner and
that the correct amount is distributed.
ARE THERE RULES FOR THE TIMING OF DISTRIBUTIONS FROM A XXXX-XXX WHILE THE
ANNUITANT IS ALIVE?
No. The rules that apply to Traditional IRAs regarding required distributions
while an annuitant is alive do not apply to Xxxx-IRAs.
WHAT FORMS OF DISTRIBUTION ARE AVAILABLE FROM AN XXX?
By the required beginning date the annuitant may elect to have the accumulation
value, or withdrawal value if applicable, distributed. It must be in one of the
following forms:
(a) a single sum payment;
(b) equal or substantially equal payments over the life of the annuitant;
(c) equal or substantially equal payments over the joint lives of the annuitant
and spouse;
(d) equal or substantially equal payments over a specified period that may not
be longer than the annuitant's life expectancy;
(e) equal or substantially equal payments over a specified period that may not
be longer than the joint life and last survivor expectancy of the annuitant
and spouse.
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Options (b), (c), (d), and (e) can be satisfied by an annuity form elected by
the annuitant or by systematic withdrawal.
Payments must be made in periodic payments at intervals of no longer than one
year. In addition, payments must be either nonincreasing or they may increase
only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations or such final regulations as adopted.
ARE THERE SPECIAL RULES IF THE ANNUITANT DIES BEFORE THE ENTIRE VALUE IN THE
CONTRACT IS DISTRIBUTED?
Yes. If the annuitant dies on or after the date distributions have begun, the
entire remaining value must be distributed at least as rapidly as under the
method of distribution being used as of the date of the annuitant's death. If
the annuitant dies before distributions have begun, the entire remaining value
must be distributed as elected by the annuitant or, if the annuitant has not so
elected, as elected by the beneficiary or beneficiaries, as follows:
(a) by December 31st of the year containing the fifth anniversary of the
annuitant's death; or
(b) in equal or substantially equal payments over the life or life expectancy
of the designated beneficiary or beneficiaries starting by December 31st of
the year following the year of the annuitant's death. If, however, the
beneficiary is the annuitant's surviving spouse, then this distribution is
not required to begin until later. It must begin by December 31st of the
year in which the annuitant would have turned 70 1/2. Minimum payments to
the surviving spouse will be calculated in accordance with the applicable
regulations.
ARE OTHER OPTIONS AVAILABLE TO A SPOUSE BENEFICIARY?
Yes. In addition to the options discussed above, the spouse beneficiary has
other options. He or she may elect to treat the annuitant's XXX or Xxxx-XXX as
his or her own. This is done by either: (a) not taking a distribution within
the required time period; or (b) making eligible XXX or Xxxx-XXX contributions
to it.
If the beneficiary chooses one of these options then he or she is the contract
owner. He or she will assume all rights and privileges under the contract.
This right is available only to the spouse of the annuitant.
HOW ARE LIFE EXPECTANCIES FOR CALCULATING REQUIRED DISTRIBUTIONS DETERMINED?
Life expectancy is computed by use of the expected return multiples in Table V
and VI of section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the annuitant prior to the commencement of
distributions or, if applicable, by the surviving spouse where the annuitant
dies before distributions have commenced, life expectancies of an annuitant or
spouse beneficiary shall be recalculated annually for purposes of required
distributions. An election not to recalculate shall be irrevocable and shall
apply to all subsequent years. The life expectancy of a nonspouse beneficiary
shall not be recalculated. Instead, life expectancy will be calculated using
the attained age of such beneficiary during the calendar year in which the
annuitant attains age 70 1/2; and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
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In the case of a Xxxx-XXX, life expectancy will be calculated using the attained
age of such beneficiary in the calendar year distributions are required to
begin; and payments for subsequent years shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated.
MAY THE ANNUITANT SATISFY MINIMUM DISTRIBUTION REQUIREMENTS BY RECEIVING A
DISTRIBUTION FROM ANOTHER XXX?
Yes. An annuitant may satisfy the minimum distribution requirements under
sections 408(a)(6) and 408(b)(3) of the Code by receiving a distribution from
one XXX that is equal to the amount required to satisfy the minimum distribution
requirements for two or more IRAs. For this purpose, the owner of two or more
IRAs may use the "alternative method" described in Notice 88-38, to satisfy the
minimum distribution requirements described above.
WITHDRAWAL BENEFITS
ARE THERE LIMITS ON WITHDRAWALS FROM AN XXX?
Yes. These limits apply to a partial withdrawal or a surrender of the contract
before the annuitant's age 59 1/2. In that case, we must receive notice of the
intended disposition of the proceeds. This will not apply if the annuitant dies
or is disabled.
ARE ALL WITHDRAWALS FROM XXXX-IRAS SUBJECT TO FEDERAL INCOME TAX?
No. Purchase payments to Xxxx-IRAs are not deductible. Any partial withdrawal
or surrender of the contract that includes a return of the annuitant's purchase
payment(s) will not be taxable to the extent it is attributable to the purchase
payment(s). Earnings on the purchase payment(s) that are withdrawn are subject
to income tax if withdrawn within 5 years of the annuitant's first contribution
to a Xxxx-XXX or within 5 years of a rollover purchase payment. In addition,
earnings will be subject to income tax if withdrawn before the annuitant reaches
age 59 1/2; unless the earnings are being withdrawn because of the annuitant's
death or disability or to pay first-time home buyer expenses. If a withdrawal
is made, we must receive notice of the reason for withdrawal or intended
disposition of the proceeds. Income tax will also not apply to distributions
made if the amount received is in excess of the allowed contribution and
returned to the annuitant before the required tax return filing date for that
year, together with any earned interest; or if the entire contract is received
and reinvested in a similar plan entitled to similar tax treatment.
MAY TAX PENALTIES APPLY FOR WITHDRAWALS FROM AN XXX?
Yes. If a withdrawal or surrender occurs before the annuitant is age 59 1/2,
the annuitant may be subject to tax penalties. These penalties are imposed
under the Code. The annuitant may not be subject to tax penalties on amounts
received before age 59 1/2 if: (1) the annuitant becomes disabled as defined by
the Code; (2) the amount received is in excess of the allowed deduction and
returned to the annuitant before the required tax return filing date for that
year, together with any earned interest; or (3) if the entire amount in the
contract is received and reinvested in a similar plan entitled to similar tax
treatment. Additional exceptions to tax penalties may be available to the
annuitant.
We will not be liable for any tax penalties under this contract. We are not
liable for penalties on amounts received or paid by us under this contract.
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Any transaction treated by law as a contract distribution may be treated by us
as a complete contract surrender.
MAY TAX PENALTIES APPLY FOR WITHDRAWALS FROM XXXX-IRAS?
Yes. Certain tax penalties are imposed under the Code. If the annuitant owes
income tax on the amount withdrawn, the annuitant will also generally be subject
to a 10% premature withdrawal tax penalty on the amount on which the annuitant
paid income tax. However, the tax penalties will not apply if earnings in the
Xxxx-XXX are withdrawn within 5 years of the annuitant's first contribution to a
Xxxx-XXX or within 5 years of a rollover purchase payment from a Traditional XXX
if the distribution is: (1) made on or after the date on which the annuitant
attains age 59 1/2; (2) made because of the annuitant's disability or death; or
(3) made because the amount received was in excess of the allowed contribution
and returned to the annuitant before the required tax return filing date for
that year, together with any earned interest. In addition, the tax penalty will
not apply to a distribution if the entire contract is received and reinvested in
a similar plan entitled to similar tax treatment. Additional exceptions to tax
penalties may be available to the annuitant.
We will not be liable for any tax penalties under this contract. We are not
liable for penalties on amounts received or paid by us under this contract. Any
transaction treated by law as a contract distribution may be treated by us as a
complete contract surrender.
GENERAL INFORMATION
IS THE INTEREST OF THE ANNUITANT IN THIS CONTRACT NONFORFEITABLE?
Yes. The entire interest of the annuitant in this contract is nonforfeitable.
The annuitant shall possess the entire benefit provided by this contract. This
contract is established for the exclusive benefit of the annuitant and his or
her beneficiaries.
HOW WILL A REFUND OF PREMIUMS BE APPLIED?
Any refund of premiums (other than those attributable to excess purchase
payments) will be applied, before the close of the calendar year following the
year of the refund, toward the payment of future premiums or the purchase of
additional benefits.
MAY THIS AGREEMENT BE AMENDED?
Yes. This contract may be amended as required to reflect any change in the
Code, regulations or published revenue rulings. The annuitant will be deemed to
have consented to any such amendment. We will promptly furnish any such
amendment to the annuitant.
This agreement is effective as of the original contract date unless a different
effective date is shown here.
Secretary
President
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