Definition
Annuity payment method used under an annual benefit payment from a defined benefit plan. Under this option, an annuity income stream is paid to the participant(annuitant ) and continues for the life of the annuitant. The payments ceases when the annuitant dies.
Referring Cite
IRC §415(b)(2)(A), IRC §415(b)(2)(B), Section 1.415-3(c)(2)(iii) of the Federal Income Tax Regulations
Additional Helpful Information
- Also referred to as while life annuity and pure life annuity
- Usually pays larger periodic payments
- Possibility exist that annuitant may died before premium is recovered
- Ideally suited for annuitants with no beneficiaries, as the payments will discontinue when the annuitant dies
- Under IRC § 415(b)(2)(B), if the benefit under the plan is payable in any form other than a straight life annuity, the determination as to whether the limitations of IRC § 415(b) have been satisfied shall be made by adjusting such benefit so that it is equivalent to a straight life annuity.
