Qualifying Annuity

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DEFINITION of 'Qualifying Annuity'

This type of annuity is similar to any other, except that it has been approved by the IRS for use within a Qualfied Retirement Plan or IRA. Qualifying Annuties can be either fixed, indexed or variable, depending upon the investment objectives of the plan sponsor. Contributions made into a Qualifying Annuity are tax-deductible according to ERISA guidelines, unless the plan or annuity has a Roth feature.

INVESTOPEDIA EXPLAINS 'Qualifying Annuity'

Qualifying Annuities are not tax-deductible plans in and of themselves; they must reside within a Qualified Plan or IRA in order to enjoy this status. Qualifying Annuities can be either the sole vehicle inside the plan or account, or they can be one of several other choices that are offered as well. In many cases, the Qualifying Annuity is a variable contract and is the only vehicle offered within the plan, with the variable subaccounts constituting the choices available to plan participants.

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RELATED FAQS
  1. For what types of financial instruments would I want to calculate the present value ...

    Because the present value of an annuity formula relies on a consistent interest rate and identical payments for a set period ... Read Full Answer >>
  2. What exact information is included in the interest rate when calculating the present ...

    When calculating the present value of an annuity, the interest rate percentage is the rate at which future payments are discounted ... Read Full Answer >>
  3. How do you calculate a present value of annuity using Excel?

    Calculating the present value of an annuity using Microsoft Excel is fairly straightforward if you know the interest rate, ... Read Full Answer >>
  4. What is the difference between the present value of an annuity and the future value ...

    The present value of an annuity represents the sum that must be invested now to guarantee a desired payment amount in the ... Read Full Answer >>
  5. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  6. Why would I need to calculate the present value of an annuity?

    To calculated the present value of an annuity, all that is needed is the interest rate, payment amount and number of periods ... Read Full Answer >>
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