Course Information

Course No:  9530122

Course Name:  Tax Treatment of Retirement Plans, Pensions and Annuities

Field of Study:    Tax Law Topic

Course Description:  

Employer-sponsored retirement plans, generally referred to in the aggregate as qualified employee plans, constitute one of the important “legs” of the retirement stool that individuals look to for their income in retirement. The other two legs of that stool are personal savings—through investment in securities, deferred annuities, savings accounts, etc.—and Social Security retirement benefits. This course will examine qualified employee plans, their limits and their tax treatment along with a discussion of annuities and their taxation.

Annuities offer their owners the opportunity to systematically liquidate a principal sum or save money for a long-term objective. For many annuity buyers, that objective is to provide income during retirement. As we will see in our examination of annuities, they provide owners with a number of advantages; principal among them is their tax treatment. By purchasing and investing in an annuity, a contract owner can avoid current income taxation of earnings. By avoiding current income taxation, earnings that might have been used to pay current income taxes can be invested to produce additional income.

Annuities’ tax advantages aren’t limited to tax deferral, however; annuities offer additional tax advantages. For example, an investor purchasing a variable annuity can change his or her investment allocation in the contract’s variable subaccounts whenever desired. Typically, such changes are made in order to implement new objectives or to modify the level of risk assumed. From a tax point of view, the important issue is that the contract owner can make these changes without being required to recognize income as would be required if, for example, the investor liquidated his or her stock portfolio in order to purchase bonds. In addition to these tax benefits, a contract owner that elects to annuitize his annuity contract, i.e. to take a periodic income from it, will find that part of each periodic income payment may be tax free as a return of his or her investment in the annuity contract.

Learning objectives: After completing this section, you should be able to:

  • Describe the types and characteristics of qualified employee plans;
  • Explain the limits imposed on qualified employee plan contributions and benefits;
  • Describe the requirements applicable to qualified employee plan loans; and
  • Explain the rules governing rollovers to and from qualified employee plans.
  • Describe the tax treatment of loans from qualified plans;
  • Recognize the changes made to qualified plan loans and coronavirus-related distributions by the CARES Act; and
  • Apply the federal tax laws to qualified employee plan contributions and distributions.
  • List the principal types of annuities;
  • Describe the principal characteristics of deferred and immediate annuities; and
  • Explain the tax treatment of annuity contributions, distributions taken as an annuity, surrenders, loans and withdrawals.

Course Material: Online Material

Program level: Overview

Prerequisites: None

Advance preparation: None

Type of delivery method: QAS Self-study

Recommended CPE credits:   3.0

Final examination expiration date:   The program participant will have one year from the date of purchase to complete the course and final examination.