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the valuation date and ends before the date the premium is

same manner as an employee’s account balance is

paid.

increased under Regulations section 1.401(a)(9)-7, A-2 to

The account balance is decreased for distributions made

reflect a rollover received after the last valuation date.

from the account during that same period.

If the excess premium is returned to the non-QLAC portion

Limitations on Premiums — IRAs

of the employee’s account as described above, it will not be

treated as a violation of the requirement that the contract not

The premiums paid with respect to the contract on a date

provide a commutation benefit.

satisfy the limitations requirements if they do not exceed the

lesser of the dollar limitation of 1.408-8, Q&A-12(b)(2) or the

Death of Employee

percentage limitation of 1.408-8, Q&A-12(b)(3).

Surviving spouse is the sole beneficiary. If the employee

Dollar limitation. The dollar limitation is an amount equal to

dies on or after the annuity starting date for the contract, the

the excess of $130,000 over the sum of (1) the premiums

only benefit allowed to be paid (except as provided in

paid on the contract before that date and (2) the premiums

paragraph (c)(4) of Q&A-17) after the employee's death is a

paid on or before that date on any other contract intended to

life annuity payable to the surviving spouse where the annuity

be a QLAC and that is purchased for the IRA owner under

payment is not in excess of 100% of the annuity payment that

the IRA, or any other plan, annuity, or account described in

is payable to the employee.

section 401(a), 403(a), 403(b), or 408 or eligible

If the employee dies before the annuity starting date, the

governmental plan under section 457(b).

only benefit allowed (except as provided in paragraph (c)(4)

Percentage limitation. The percentage limitation is an

of Q&A-17) is a life annuity payable to the surviving spouse

amount equal to the excess of 25% of the total account

where the annuity payment is not in excess of 100% of the

balances of the IRAs (other than Roth IRAs) that an individual

annuity payment that would have been payable to the

holds as the IRA owner (including the value of any QLACs

employee as of the date that benefits to the surviving spouse

held under those IRAs) as of December 31 of the calendar

start. However, the annuity is permitted to exceed 100% of

year immediately preceding the calendar year in which a

the annuity payment that would have been payable to the

premium is paid over the sum of (1) the premiums paid

employee to the extent necessary to satisfy the requirement

before that date on the contract, and (2) the premiums paid

to provide a qualified preretirement survivor annuity (as

on or before that date on any other contract intended to be a

defined under section 417(c)(2) or ERISA section 205(e)(2))

QLAC and that is held or was purchased for the individual

pursuant to section 401(a)(11)(A)(ii) or ERISA section 205(a)

under those IRAs.

(2).

For the purposes of the dollar and percentage limitations

Any annuity payable to the surviving spouse of an

on premiums, unless the trustee, custodian, or issuer of an

employee who dies before the annuity starting date must

IRA has actual knowledge to the contrary, the trustee,

start no later than the date on which the annuity payable to

custodian, or issuer may rely on the IRA owner’s

the employee would have started under the contract if the

representation, made in writing or in such other form as may

employee had not died.

be prescribed by the Commissioner, of the amount of

Surviving spouse is not the sole beneficiary. In this

premiums paid for any other contract intended to be a QLAC

situation, the only benefit allowed (except as provided in

and that are not paid under the IRA, and the account balance

paragraph (c)(4) of Q&A-17) after death is a life annuity

of any other IRA.

payable to the designated beneficiary where the annuity

payment is not in excess of the applicable percentage

Consequences of Excess Premiums

(determined under (c)(2)(iii) of Q&A-17) of the annuity

If an annuity contract fails to be a QLAC solely because a

payment that is payable (if the employee dies on or after the

premium for a contract exceeds the limits under paragraph

annuity starting date for the contract) or would have been

(b) of Q&A-17, then the contract is not a QLAC beginning on

payable (if the employee dies before the annuity starting

the date that premium payment is made unless the excess

date) to the employee. For more information on the

premium is returned to the non-QLAC portion of the

applicable percentage, see Regulations section 1.401(a)

employee’s account in accordance with paragraph (d)(1)(ii)

(9)-6, Q&A-17(c)(2)(iii).

(B) of Q&A-17. If the contract fails to be a QLAC, then the

When the employee dies before the annuity starting date,

value of the contract may not be disregarded under A-3(d) of

any life annuity payable to a designated beneficiary (other

Regulations section 1.401(a)(9)-5 as of the date on which the

than a surviving spouse) must commence by the last day of

contract ceases to be a QLAC.

the calendar year immediately following the year of the

employee's death.

If the excess premium is returned to the non-QLAC portion

of the employee’s account by the end of the calendar year

Multiple beneficiaries. If an employee has more than one

following the calendar year in which the excess premium was

designated beneficiary under a QLAC, the rules in A-2(a) of

originally paid, then the contract will not be treated as

Regulations section 1.401(a)(9)-8 apply for purposes of

exceeding the limits under paragraph (b) of Q&A-17 at any

paragraphs (c)(1) and (c)(2) of Q&A-17.

time, and the value of the contract will not be included in the

employee’s account balance under A-3(d) of Regulations

Return of Premiums

section 1.401(a)(9)-5.

In general, in lieu of a life annuity payable to a designated

beneficiary under paragraph (c)(1) or (c)(2) of Q&A-17, a

If the excess premium is returned to the non-QLAC portion

QLAC is permitted to provide for a benefit paid to a

of the employee’s account after the last valuation date for the

beneficiary after the death of the employee in an amount

calendar year in which the excess premium was originally

equal to the excess of the premium payments made with

paid, then the employee’s account balance for that calendar

year must be increased to reflect the excess premium in the

-2-

Instructions for Form 1098-Q (2018)

Instructions For Form 1098-Q - Qualifying Longevity Annuity Contract Information - 2018 Page 2

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