10% Penalty on Annuity

[Julieolo]

Julieolo there are rules about computing the tax and rounding. Some taxes have pre-calculated taxes based upon the taxable amount. For those that don't, I believe you round to the nearest whole dollar.

So that 10% penalty is exactly the right amount if they are only penalizing me for Taxable amount and not the Gross Distribution.

So, I feel like this confirms that the brokers compliance manager is incorrect when she tells me I will suffer a 10% penalty if I up my monthly amount which would taking from the principle.

 

[Julieolo]

Let's not forget that if you were receiving $400/month for 12 months, that would be $4,800 distributed and (for this, assume 100% of it is taxable), that would mean a $480 tax penalty

This is true.

Perhaps the actual amount is small and not a big deal... but you still received improper and/or incomplete advice from your advisor.

Your right. I should probably still right a complaint. He really needs to learn his job. It is not fair to his clients or potential clients if he is not informed about the products he is selling.

When I did an internet search on him I found 2 customer disputes. One in 2008, alleged damages $100,000 and 2006, alleged damages $23,000. Now maybe 2 complaints is not a big deal. Maybe it is normal to have a few complaints due to the nature of the business but when I read the allegation section I can see him doing what he did.

 

[DHK]

Complaints, by themselves, is a sign that someone has been in the business for a long time and does a lot of business. In 2008, that would be a "prime" year to complain as an attempt to recoup investment losses - that may or may not be justified.

However, I would look into the reasons why the complaint occurred and what the final disposition was. I would actually be surprised that there were only two complaints, given the service/advice you received.

Btw, look him up on FINRA's Broker Check for the details, rather than some of these other websites that just compile information.

 

[Julieolo]

Complaints, by themselves, is a sign that someone has been in the business for a long time and does a lot of business. In 2008, that would be a "prime" year to complain as an attempt to recoup investment losses - that may or may not be justified.

Well in that case he does look ok.

Btw, look him up on FINRA's Broker Check for the details, rather than some of these other websites that just compile information.

FINRA show the same 2 customer complaints I found when I searched. Both are in relation to annuities. An AXA VARIABLE ANNUITY & VARIABLE ANNUITY WAS UNSUITABLE FOR HIS CLIENT. The axa was denied but she received a check from axa. Maybe they gave her the money back? The other was denied and went to litigation.

It looks like he has worked all over the country in several different states. Maybe his lack of knowledge is do to this, assuming each state has different rules and such?

 

[DHK]

Different broker/dealers are headquartered in different places. It's a non-issue.

And many reps are licensed in many states as clients move, etc.

 

[Julieolo]

I made some progress today. After feeling more confidante that being told I had to pay 10% penalty on everything was wrong, I gave AIG another call. I asked for the same lady that had agreed with the compliance manager at the broker that I would have to pay but she was not available. I talked with someone else.

I started the call letting her know that I was recording the call and was that ok. She said yes. I told her that I was receiving what I felt like was accurate information that contradicted what they were telling me and could she please explain to me again why they thought I would have to pay penalties on the principle. I told her there must be a disconnect somewhere and I needed to figure out why I was getting different answers.

She told me that she did not know the tax code and was not sure, BUT here is the difference. I told her about the 72(q) withdraw tax code that you guys all mentioned. She went and looked it up. It only took her 6 minutes! She came back with a form, asked me some questions to fill it out and explained to me how it worked and that they would be drawing up an illustration with some calculations and would mail it to me for approval. So there it is. Every single person that I had talked to was not aware of the 72(q).

I am still to receive a complaint form from AIG and I will still be filling this out as I would have never agreed to this policy if he had told me about the penalties.

The CPA has not returned my call yet but I live in a small town and it is not unusual for businesses to randomly put up a closed for the day sign and go home.

That is my update for the day =)

 

[Julieolo]

IF, you were not given a policy, then the Annuity Contract is not valid from a legal standpoint. Legally, you must take "receipt" of the Policy for it to be a valid legally binding contract. Often, carriers require that a "delivery receipt" be signed by the client. This says that you accept the contract and the agent has given you the Contract (hence the term delivery receipt, its a receipt for delivery of the contract to you).

I grabbed all the information I received in regards to my annuity from my safety deposit box. It is a duplicate of what I keep at home in my file.

I do not think I have a copy of the contract. Maybe if I give a description of what I have you can tell me if I am wrong. The only thing I have that looks like a legal document is a copy of the application

I have a packet with the follow...

Page
1: A congratulations letter
2. Annuity Information Page - Information for contract number #####
3. Access Made Easy - This tells me how I can access the information online
4. A page that explains Free Look and says "Keep this with your contract for your records."
5. A page that tells me about the surrender fees
6. Schedule Page
7. Contents Page
--Schedule Page
--Definitions
--Owner
--Joint Owner
--Annuitant
--Beneficiary
--Changes To Owner, Annuitant or Beneficiary
--Policy Value
--Withdrawals
--Income Plans
--Death Benefits
--General Information
--Accumulation Table
--Minimum Monthly Income Plan Values
--Annuity Application.............................................Attached Pg. 4, 14, 15, 7

The only other documents I have is an Amendment of Application to fix my address that they had wrong.

I think what has happened here is...I have a physical address and a mailing address. When I started all this I was contacted by AIG telling me that they tried to mail me something and it was returned to them. They where trying to mail something to my physical address which is not possible.

They sent me an Amendment of Application to sign. They said they needed this to update the address which I signed and returned to them. I will bet they where trying to mail me the contract and simply never did after the address was fixed. I never signed for anything from them. This may be in my favor I think. I might actually be able to cancel this policy if I am willing to fight for it.

Thought anyone?

 

[VolAgent]

#7 sounds like the policy. I'm just confused why it only contains select pages from the application.

I know sometimes pages that we fill out at application time are not actually part of the application and are not included, but you would think the actual application would have consecutive page numbering. After all, any attorney would immediately jump on that.

 

[scagnt83]

That is the policy/contract. Do you see a copy of a document that says "Delivery Receipt" or "Document of Acceptance" or something similar? It would be signed by you.

 

[Julieolo]

Nothing that says "Delivery Receipt". I signed the application twice. The rest is about a 16 page print out that describes things like, what happens if I die, a list of definitions and so on but it does not look like a contract like when you buy a car or sign for a loan. It is not something that I signed. Is it possible that the application acts as a contract because that is the only thing I signed.

At the bottom left of each page shows "S117-12-CA-3". A google search doesn't come up with anything though.

I have an appointment with a CPA next week. Hopefully after I talk to him I can get an answer to all my questions and finally put this thing to rest one way or another.