Annuitization Workup AWK (SR Admin) SOP

Date: 08/19/2011
Version 2.0

Table of Contents
1.

INTRODUCTION...............................................................................................4

2.

OVERVIEW AND PURPOSE..................................................................................4

3.

SAS 70 CONTROLS & SLA...................................................................................4

4.

PROCESSING PROCEDURES.................................................................................4
4.1

Requirements............................................................................................................ 4

4.2

Specimen Review & Calculations.....................................................................................4

4.3

Noting the System:...................................................................................................... 8

4.4

Next Step Request:...................................................................................................... 8

ATTACHMENTS...............................................................................................8

TROUBLESHOOTING.........................................................................................8

REVISION LOG................................................................................................8

Page 2 of 9

 2010 Dell Inc. All Rights Reserved. Dell and Perot Systems
are trademarks of Dell or its affiliates and are registered in
the USA and other countries. All other trademarks are the
property of their respective owners.

Page 3 of 9

Introduction
The procedure defined in this document is subject to regular review based on input from
administrative team associates, client and Release updates and enhancements. Suggestions for
improvement to the content of this procedure should be submitted to SR Admin1 at
PSC-Lincoln NE Admin1 Inquiry

Overview and Purpose

This document will establish the process that will be taken to calculate an annuitization request before
setting up the supplemental contract for the annuitized policy.

SAS 70 Controls & SLA

Within each service contract between the TPA and a client, there exists Service Level Agreements
(SLA). An SLA is that part of a service contract in which a certain level of service is established. The
following name of procedure SLA(s) exists for all companies receiving this administrative service:

Annuitization (all parent tasks & next steps)

o

100% Within 5-7 Business Days

Processing Procedures
Requirements
Authorization & Requirements are verified in the ANZ (IGO/NIGO)

Specimen Review & Calculations

Initial Review of Policy
Verify the policy is eligible for annuitization
o Does policy have an active loan
If yes STOP dont process annuitization until the loan is cleared Send 119
letter
o

For TSA policies

is the owner under 59.5
If Yes re-send the quote & use 119 letter to request triggering event and letter of
employer authorization

If tables are provided ensure that the options that are requested are available in the
table.
Pull up the policy specimen.
o Verify that the annuity tables are provided in the policy specimen.
If tables are provided verify that the option requested is available in the
tables.
Verify that the policy limitations for payment are met.
o Some contracts have a minimum payment amount (typically $25)
or a minimum account value required for annuitization (typically
$1000).

Calculation of the Annuitization

There are 3 general types of an annuitization.

o
Period Certain
o
Life Certain
o
Period Certain then Life
Page 4 of 9

o
o
o

These quotes can be run for the following frequencies

Monthly

Quarterly

Semi-Annually

Annually
If the Insured did not request a specific option the following quotes will be run
5 Years Certain-Monthly
10 Years Certain-Monthly
10 Years Certain and Life-Monthly

Open the Annuitization Calculation Workbook Updated 9-22-10

Workbook Location - G:\Admin1\Check Processing\CheckLists
When the warning box appears hit Dont Update

Complete the General Information in the yellow & blue sections of the Workbook.
(Note: Only the yellow fields are used for the quote process the additional blue fields are for the
full annuitization after the quote is accepted.)

In the Policy Number Field enter the Policy Number

In the Company Number Field enter the Company Number

In the Plan Field enter the Plan code for the policy

In the Insured Field enter the Insureds Name

Page 5 of 9

In the Issue Date Field enter the date that the policy was issued. Enter EFT routing and
account numbers, if applicable.

Enter tax qualification informationqualified or non-qualified from the drop down box.
Type TSA above this if it is a TSA.

o
o

Enter Cost Basis if non-qualified.

Enter tax withholding information, if applicable.
o NOTE: For Qualified TSA (403b) policy tax withholding.
The IRS lists annuitizations as a periodic payment or contract that cannot be
changed once it is set up. Therefore the funds being paid out through this
annuitized TSA are no longer eligible for transfer/rollover as they have to be
paid out to the owner as the annuitization contract states.
o On the W4-P taxelection form the owner has two choices

1. DO NOT WITHHOLD TAXES

With A distribution code 7 this is ok on a TSA only for
annuitized periodic payments were the owner is 59.5 or
older before the payments start. This will only work on
the 56/57 screen for TSA policies with the SUPK/SPIA
plan code.
If the owner has not reached the age of 59.5 by the time
they are annuitizing this policy then we must use a
distribution code of 1 with 20% tax withheld for early
distribution or 2 with 10% tax withheld in the case of an
exception. (example SEPP)
2. YES WITHHOLD TAXES
They may just write on the W4-P or the annual tax
election form that they want 10% or 20% withheld, and
that is ok. 10% can be accepted only for annuitized
periodic payments were the owner is 59.5 or older before
the payments start.
3. WITHHOLDING BASED ON MARITAL STATUS WITH 3
EXEMPTIONS.
We will use this withholding on TSAs where the owner is
59.5 or older at the time the payments start.
Page 6 of 9

 Under this election on the W4-P form they will indicate

their marital status on line 2 as shown above.
This will also be used in cases where they return the
W4-P with no withholding election or they do not return
the W4-P form
o

Enter supplemental contract number, issue date of the supplemental contract, first
payment date and last payment date.

In the Single Premium field enter the Fund Value off of the 24/D Screen.
NOTE for Company 2Q We would like to follow these guidelines for FPDA-500 annuitization

requests:
At maturity, pay the cash value (Fund Value)
If annuitization is requested prior to the maturity date, pay the cash surrender value
Exception: If the contract has been in force 5 years (should be all) and a lifetime annuity
option is elected, we will pay the cash value.
To verify if the policy is infact an FPDA-500 referance the FORM GROUP field on the 95 screen
for that policy. So policies may be FPDAs but not specifically the FPDA-500.

In the Sex field use the Drop Down box to enter the Sex of the Insured

In the Mode box use the Drop Down box to enter the frequency in which payments are
desired.

In the Issue Age field enter the current age of the Insured

In the Life v Fixed field use the Drop Down box to verify the following
Life-Payments will be made over the Insureds Lifetime
o This option should only be utilized for the Life Only Annuitization
Option.
Fixed-Payments will be made over a fixed period of time.
o This option should be utilized on the Certain with Life Annuitization
Option.

In the Fixed v. Certain field use the Drop Down box to verify the following
Fixed-Payments will be made over a fixed timeframe
o To be used with Period Certain quotes only
Certain-Payments will be made for the Insureds Lifetime
o To be used with Life certain and Period Certain with Life quotes.

In the Certain Period enter the number of years that a certain period quote is to be run
for
Ex. If the quote is for 5 Year Certain With Life you would enter a 5.

In the Interest Rate Field enter the percentage the policy is earning based on the policy
specimen.
The most common rates will be 3% and 4%.

In the Mortality Basis field use the Drop Down box to indicate the mortality table that
will be used for this quote
1937-Policies issued between 1937-1970
1971-Policies issued between 1971-1982
1983-Policies issued between 1983-Current

Page 7 of 9

Verification of the Calculation

In the Annuity Factor/$1K field in the Calculation section of the worksheet verify that the
factor calculated matches the factor provided in the policy specimen.
If the factor does not match change interest rate to make Annuity Factor/$1K
correct factor provided in the policy specimen.
Screen print the 24-D screen as of the workup date and save on the screen print tab.

List the beneficiaries, if provided, on the Beneficiary tab of the workbook.

Save the workbook to G:\Admin1\Check Processing\(CKP) Cut Check

In the current months folder

In the correct company folder
Name it as such 0N136339_2M_ANZ (policy#_Co#_ANZ)

Move the task from LCLAIM AWK to LCLAIM AST for the supplemental contract to be
entered and LCLAIM AQC for quality check.
When the policy passes quality check, the task is moved to LCLAIM APY

Noting the System:

Examples:
<mm/dd/yy> Processed annuitization workup and saved to G drive. Next stepped to AST
for SUPK to be step up. <OPID>

Next Step Request:

Note the policy

From 21 screen, press shift F12
o Will bring you to the Task List Screen
o Take out P in status field
o Put in policy number in Policy ID field
o Find AWK task that is in P status, place cursor on task and hit F4
o Set AST Task-Y (yes to create next step task)
o Press F5 then F8 to return to the Policy Task List

Attachments
NA

Troubleshooting
NA

Revision Log
Name of Reviser

Beth Huff
Beth Huff

Date/Revision
No.

10/1/10
8/19/11

Revisions Made

Creation of SOP
TSA withholding info added.
Page 8 of 9

Page 9 of 9