On June 9, 2009, Representatives Earl Pomeroy (D-ND) and Ginny Brown-Waite (R-FL) introduced the Retirement Security Needs Lifetime Pay Act of 2009 (H.R. 2748), to encourage retirees to receive some of their retirement savings in the form of annuities with guaranteed lifetime income. The legislation excludes from taxable income (1) 50 percent of annual annuity payouts from a non-qualified plan, up to $10,000 per year, and (2) 25 percent of annual annuity payouts from Individual Retirement Accounts and qualified retirement plans other than defined benefit plans.
The legislation also creates a tax incentive for the purchase of longevity insurance (an annuity designed to begin payments when the annuitant attains an advanced age, e.g., 85). It excludes the value of longevity insurance from amounts subject to required minimum distributions, thus allowing for higher annual payments when an annuitant delays the start of payouts. The act also clarifies the taxation of payments from partially annuitized deferred annuity contracts by giving such payments the same tax treatment as other annuity payments.
This bill, and similar legislation, has been proposed before. None of the three prior bills has made it out of committee. With the growing concern over the financial stability of Social Security, the prospects of passage of the current legislation might appear more likely; however, with the President’s proposed “pay as you go” legislation, which would require that any increased spending or tax cuts be offset by an equal amount of savings from other programs, H.R. 2748 is likely to face considerable resistance in Congress.