CINCINNATI--(BUSINESS WIRE)--Less than three months after receiving an IRS Private Letter Ruling (PLR) that eases the taxation of advisory fees, Great American Life® released a new endorsement that goes one step further to simplify the payment of advisory fees from an annuity.
The endorsement provides three new benefits for Great American's fee-based annuity contract owners. First, withdrawals to pay advisory fees are not subject to an early withdrawal charge or market value adjustment. Second, the withdrawal does not reduce the contract’s free-withdrawal amount. And third, the withdrawal will not reduce income rider benefits.
This favorable treatment of advisory fees is the latest milestone in Great American’s goal to make annuities more compatible with an advisory portfolio.
“The negative consequences were twofold when it came to advisory fee withdrawals. The withdrawal may have been a taxable event to the client, with the potential for an additional 10% tax penalty. Plus, clients had to consider how the withdrawal would affect their annuity benefits,” says Tony Compton, Great American Life Divisional Vice President of Broker/Dealer and RIA Sales. “With the Private Letter Ruling and now this endorsement, we’ve eliminated those negative consequences, making it easier for our annuities to work within a fee-based portfolio.”
The endorsement is included with all Great American Life fee-based annuity contracts issued on or after October 28, 2019. The company is retroactively endorsing contracts issued before October 28. The favorable treatment is subject to the limitations described in the endorsement.
The PLR was issued to Great American Life on August 6, 2019 and concluded that advisory fees may be withdrawn from a nonqualified fixed-indexed annuity without creating a taxable event for the client. The ruling also eliminates the 10% tax penalty that may have applied to clients who are not yet age 59½. The ruling is limited to fee-based nonqualified annuities sold by Great American Life. The annual fee cannot exceed 1.50% of the annuity’s account value.
Great American Life launched the industry’s first fee-based fixed-indexed annuity in 2016. Since that time, the company has introduced several technology solutions to support the unique needs of Registered Investment Advisors (RIAs), including a cutting-edge portfolio simulator and an advanced electronic application system. Visit GreatAmericanRIA.com to find these resources and more.
Great American Life Insurance Company® is a member of Great American Insurance Group® and is rated “A+” by Standard & Poor’s and “A” (Excellent) by A.M. Best for financial strength and operating performance.
The annuity operations of Great American Insurance Group (GAIG) offer retirement solutions through the sale of traditional fixed, fixed-indexed and variable-indexed annuities in the retail, broker-dealer, financial institutions, registered investment advisor and education markets. Annuity subsidiaries include Great American Life Insurance Company® and Annuity Investors Life Insurance Company®. GAIG’s roots go back to 1872 with the founding of its flagship company, Great American Insurance Company. The members of GAIG are subsidiaries of American Financial Group, Inc. (AFG). AFG’s common stock is listed and traded on the New York Stock Exchange under the symbol AFG. AFG is a Fortune 500 Company with more than $65 billion in assets. Learn more at GAIG.com.
S&P rating affirmed March 14, 2019. “A+” is fifth highest of 21 categories. A.M. Best rating affirmed September 11, 2019. “A” (Excellent) is third highest out of 16 categories.
Benefits are provided by Advisory Fee Endorsement form E6061519NW. Form number and availability vary by state.