MYGA with multiple interest rate periods

[Allen Trent]

Anyone aware of any carriers that allow multiple interest rate periods within 1 contract versus having to open a separate annuity contract for each desired length of interest rate lock? I.E. laddering within 1 policy.

Client with 200k wants 50k in 5 yr, 50k 3yr, 50k 1yr & 50k in current month to month. At the end of each interest rate maturity, they may elect a new rate period lock at that time.

 

[Tahoe Ray]

Anyone aware of any carriers that allow multiple interest rate periods within 1 contract versus having to open a separate annuity contract for each desired length of interest rate lock? I.E. laddering within 1 policy.

Client with 200k wants 50k in 5 yr, 50k 3yr, 50k 1yr & 50k in current month to month. At the end of each interest rate maturity, they may elect a new rate period lock at that time.

I don't think that exists, Allen. I think that you're going to be stuck with a 3 and 5 year MYGA and CDs/money market for the rest.

It's a really interesting idea though.

 

[Allen Trent]

I don't think that exists, Allen. I think that you're going to be stuck with a 3 and 5 year MYGA and CDs/money market for the rest.

It's a really interesting idea though.

Thanks. I assumed it might not exist, but it would be great for consumer, agent & possibly carrier.

With so many other variable & indexed products out there that allow allocation to multiple categories, this would seem possible.

Inverted yield curve today makes some of the short term rates look better. Filling out 1 application instead of 3 or 4 would be easier too.

 

[Tahoe Ray]

Thanks. I assumed it might not exist, but it would be great for consumer, agent & possibly carrier.

With so many other variable & indexed products out there that allow allocation to multiple categories, this would seem possible.

Inverted yield curve today makes some of the short term rates look better. Filling out 1 application instead of 3 or 4 would be easier too.

Some MYGAs have the same app/disclosure etc. regardless of length. You have just a check box/fill in rates for the length so a few copies of the same completed app should do the trick (of course, the client will have more signatures than getting a mortgage but what can you do?)

 

[DHK]

If you're dealing with non-qualified annuities, combining them all into one contract would negate the tax advantage of having multiple contracts. (Obviously, with qualified contracts, it wouldn't matter.)

Annuity Tax Legislation - Annuity Financial

1988 – TAMRA
The Technical and Miscellaneous Reform Act of 1988 (TAMRA) had yet another change for annuities. Congress found that instead of buying, say, one annuity contract for $100,000, individuals were buying ten $10,000 contracts. They would then take distributions from one contract, the amounts of which exceeded interest earnings credited to the one contract. This meant that these distributions would be deemed a return of principal and only partially taxed. Congress considered this to be abusive.

Therefore, they instituted what has become known as the “aggregation rule.” This rule states that all annuities purchased within one calendar year will be aggregated and treated as one contract for the purposes of determining taxation of withdrawals. The effective date of this requirement was October 22, 1988. Annuities purchased prior to that time are grandfathered from this provision.

 

[Allen Trent]

If you're dealing with non-qualified annuities, combining them all into one contract would negate the tax advantage of having multiple contracts. (Obviously, with qualified contracts, it wouldn't matter.)

Annuity Tax Legislation - Annuity Financial

Actually, having multiple NQ contracts has no benefit from my understanding. The tax laws don't allow you to take tax free cost basis from 1 contract if you own other NQ with gains. I think it is based on all bought in same year with same carrier. Just dealt with this on a 750k NQ where client wanted 3 separate 5 yr myga so that they could decide for each account in 5 yrs of they wanted to ladder a 1, 3 or 5yr rate.

I will check, but I believe it is called Serial Annuity contracts as an Aggregation rule. Very similar to how people trying to do back door Roth IRA get burned because they have to aggregate all forms of IRAs they already own, this getting taxed on a pro rata share of the tax free conversion to total taxable IRA accounts already in existence with all custodians.

 

[MAnnuity]

It's been a while and I am not sure if they still offer it, but didn't Integrity have a product like this? I believe it was a 7 or 10 year surrender, and you could allocate funds to different maturity periods/different rates. They offered a "QIO" or quarterly interest option.

 

[Allen Trent]

It's been a while and I am not sure if they still offer it, but didn't Integrity have a product like this? I believe it was a 7 or 10 year surrender, and you could allocate funds to different maturity periods/different rates. They offered a "QIO" or quarterly interest option.

I am not sure, but I will look into it. thank you

 

[Allen Trent]

I found it & yes they do offer a few products that offering laddering inside of 1 policy:

Annuiquest:
https://www.westernsouthern.com/-/m...hash=E05B02F705AE035F63A40CB97B37210EDDF578A5

MultiRate: https://www.westernsouthern.com/-/m...hash=3C56C58C6BA5DA907DF6E3564EEFA136C9CC222B

New Momentum Flex with the QIO you mention for flex rate on a quarterly basis: New Momentum Flexible Premium Deferred Annuity (FPDA) | W&S Financial Group Distributors

maybe more. Thanks

 

[Tahoe Ray]

It's been a while and I am not sure if they still offer it, but didn't Integrity have a product like this? I believe it was a 7 or 10 year surrender, and you could allocate funds to different maturity periods/different rates. They offered a "QIO" or quarterly interest option.

Good info. Thank you.