incentivize the choice of a lifetime payout via tax break for annuity

[papau]

H.R. 2951, joins H.R. 819, which gives a 50 percent exclusion of up to $20,000 to lifetime payouts from nonqualified annuities; and H.R. 1960 and 1961, which afford a 10 percent exclusion up to a $2,100 annual tax benefit to lifetime payouts from annuities purchased with defined contribution plan and IRA funds. Also the Senators Gordon Smith (R-OR)/Kent Conrad (D-ND) S. 1359 combines the exclusion for nonqualified annuities with the exclusion for qualified annuities. S. 1359 also provides incentives for automatic enrollment in 401(k) plans, and authorizes direct deposit of tax refunds into IRAs.

Meanwhile the Pomeroy bill would allow each individual to exclude from taxable income up to $5,000 per year in lifetime annuity payments. The formula for calculating the exclusion differs between qualified and nonqualified annuities, and for both types of annuities allows only a percentage of the otherwise taxable annual payment to be excluded, up to the $5,000 cap. The exclusion for nonqualified annuity lifetime payments is 50 percent. For an annuity purchased with defined contribution plan and IRA funds, the allowable exclusion would be 25 percent.