Which statements describe a Qualified Longevity Annuity Contract (QLAC)?

Which statements describe a Qualified Longevity Annuity Contract (QLAC)?

• A. The contract must start distributions by age 75; QLAC amount included in RMD
• B. Distributions must begin by age 90; QLAC amount counted in RMD
• C. QLACs must be funded with after-tax dollars only
• D. The contract must start distributions by age 85; QLAC amount is not included in RMD

Answer: (D)

This question tests how Qualified Longevity Annuity Contracts (QLACs) interact with required minimum distributions (RMDs). A QLAC lets you defer distributions from a portion of your retirement savings until a later age, within a defined cap, to help manage longevity risk. The key timing rule is that distributions from a QLAC must begin by age 85. In addition, the value of the QLAC is not included in RMD calculations until the distributions actually start. That means you can effectively reduce your annual RMDs from the rest of the account because the QLAC portion isn’t counted while it’s deferred. The combination described in the correct option—distributions must begin by age 85 and the QLAC amount is not included in RMD—captures both the required deferral age and the RMD treatment. The other statements mix up these points. Starting distributions by age 75 or 90 contradicts the established age limit, and saying the QLAC amount must be funded with after-tax dollars ignores that QLAC funds typically come from the pre-tax retirement account (with taxes due when distributions occur).

This question tests how Qualified Longevity Annuity Contracts (QLACs) interact with required minimum distributions (RMDs). A QLAC lets you defer distributions from a portion of your retirement savings until a later age, within a defined cap, to help manage longevity risk. The key timing rule is that distributions from a QLAC must begin by age 85.

In addition, the value of the QLAC is not included in RMD calculations until the distributions actually start. That means you can effectively reduce your annual RMDs from the rest of the account because the QLAC portion isn’t counted while it’s deferred. The combination described in the correct option—distributions must begin by age 85 and the QLAC amount is not included in RMD—captures both the required deferral age and the RMD treatment.

The other statements mix up these points. Starting distributions by age 75 or 90 contradicts the established age limit, and saying the QLAC amount must be funded with after-tax dollars ignores that QLAC funds typically come from the pre-tax retirement account (with taxes due when distributions occur).