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RMDs as annuitized payments

“A unique question arose late last week from an advisor with a wealthy 72-year-old client. In 2018, the client annuitized a large annuity contract to begin his required minimum distributions (RMDs) from his IRA. The client heard that because of a law change, he could suspend his RMD payment for 2020, so he wanted to skip his 2020 annuity payment. Can the client stop his 2020 RMD annuity payment from his IRA?

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Colorado is representative of a common inquiry related to required minimum distributions (RMDs)

Highlights of the Discussion

  • While we are still awaiting additional operational guidance from the IRS on the Coronavirus Aid, Relief, and Economic Security (CARES Act), which allows for the waiver of RMDs for 2020, the answer in this scenario is most likely no—an IRA owner may not waive an annuitized payment. The form of his distribution (i.e., annuitized payments) makes the 2020 suspension or RMDs problematic and unlikely.
  • Payments from an annuity contract take several forms. The most common payout option is periodic payments, calculated on an annual basis using a contract value and life expectancy figure, which, generally, may be stopped or modified in certain circumstances [IRC Sec. 401(a)(9)].
  • A less common choice is annuitization, where the contract is surrendered to an insurance provider in exchange for a promise to make payments for a specified time and amount. Annuitized payment choices are irrevocable ([Treasury Regulation 1.401(a)(9)-6].
  • The suspension of 2020 RMDs comes from the newly enacted federal law (the CARES Act). However annuity contracts are regulated by state not Federal law. The annuity payments obligations are based the annuity contract terms. Once the contract is annuitized the payments cannot be modified. Thus, while periodic RMD payments from an annuity could be suspended for 2020, if the client annuitized the contract—no change to the payments is permitted.
  • After additional discussion with the client, we determined the IRA contract had been annuitized and, conservatively, no changes to the payments would be possible.


While many who are subject to 2020 RMDs have the option to waive the withdrawals pursuant to the CARES Act, there are some exceptions, including annuitized payments.

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