Definition
A qualified longevity annuity contract (QLAC) is a deferred income annuity purchased inside a qualified retirement account that meets specific Treasury requirements, allowing the premium to be excluded from required minimum distribution calculations until income payments commence.
Why it matters
The QLAC is a regulatory category, not a structurally distinct product. Its significance is tax-and-distribution treatment: a QLAC allows the contract owner to defer required minimum distributions on the QLAC premium until income commencement, which makes it the standard vehicle for funding longevity-only income from inside a qualified account. The QLAC vocabulary distinguishes a regulatory category from the underlying structural arrangement, which is a deferred income annuity.
How it works
A QLAC is a deferred income annuity purchased inside an IRA, 401(k), or other qualified account. To qualify for the regulatory treatment, the contract must meet Treasury requirements: the premium must be within statutory dollar limits (set periodically by Treasury and indexed for inflation; verify current limits before publication), income must commence no later than the calendar year following the contract owner's reaching age 85, the contract may not have a cash surrender value, and certain death benefit and beneficiary structures are restricted. When these requirements are met, the QLAC premium is excluded from the contract owner's required minimum distribution calculation until the income commencement date, which functionally extends tax-deferred treatment for the deferred portion. Once income commences, distributions are taxed as ordinary income in the year received. The underlying structural arrangement is a deferred income annuity — the income mechanics, the carrier's role, the cost structure, and the lifetime payment continuation are identical to a non-qualified DIA.
In practice
For an individual considering a QLAC, the structural questions are the same as for any DIA — premium amount, deferral period, payout structure, carrier selection, realized value at the prevailing rate environment. The additional questions specific to QLAC are tax-driven: whether the regulatory dollar limits accommodate the premium amount the individual wants to commit, whether the required income commencement age fits the planning purpose, and whether the death benefit restrictions are acceptable. The QLAC is most commonly used to fund late-life longevity protection — income beginning at age 80 or 85 — as a backstop against extreme longevity scenarios. Plan fiduciaries considering in-plan QLAC options should evaluate them on the same realized value basis as any DIA, with the regulatory benefits factored into the participant-level analysis rather than treated as a substitute for structural evaluation.
In the Longevity Standard Framework
The QLAC shares its claim profile with the deferred income annuity, of which it is a regulatory subclass. The Longevity Standard framework treats the QLAC's distinguishing features — Treasury premium limits, the age-85 income-commencement deadline, the no-surrender-value requirement, the death benefit restrictions — as regulatory wrapper conditions that constrain the universe of available DIA structures inside qualified accounts but do not alter the structural arrangement itself. The cost-of-income comparison against the frictionless pool benchmark applies identically; realized value is computed using the same methodology as any DIA. The regulatory benefit (deferral of required minimum distribution treatment on the QLAC premium until income commencement) is an externality to the cost-of-income calculation and is evaluated separately at the participant level.
Related terms
- Deferred income annuity (DIA)
- Required minimum distribution
- Qualified annuity
- Annuity inside an IRA
- Deferral multiplier
- Insurer load
- SECURE Act lifetime income provisions
- SECURE 2.0 Act lifetime income provisions