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The Pension Protection Act and Long-Term Care
The Pension Protection Act (PPA) deals with changes and reforms to pension governance, specifically with annuities, long-term care and new tax advantages.
What does this mean for annuities?
Cash value withdrawals from eligible annuity contracts for qualifying long-term care (LTC) expenses or qualifying long-term care insurance premiums are no longer taxable income.
Can regular annuity withdrawals for LTC expenses be treated as tax-free distributions?
An annuity policy must include language which makes it qualifying. This would preclude a “regular annuity” (an annuity with standard free withdrawal) from receiving the benefits of the PPA.
How will long-term care benefits be reported?
Qualifying LTC and LTC insurance premiums paid from annuity values along with LTC benefits paid from riders will be reported at year-end on Form 1099-LTC.