Annuitant

Annuitant Meaning

An annuitant is a person or entity receiving a pension payment or an annuity on maturity. Upon retirement, the person receives a lump sum or timely payments of the invested annuity. However, this amount varies depending on the annuity's life expectancy. The prime purpose of an annuitant is to get benefits when a policy terminates.

In most cases, the insurance contract owner is the recipient. The recipient can be a civil servant, an investor, or a corporate working member. However, the contract owner has the right to choose its recipient and beneficiary. Unless the contract holder and annuity receivers are legally the same, the latter cannot withdraw, deposit, change or end the contract.

• The annuitant in insurance is someone who receives regular payments or lump sum money according to the annuity contract. In most cases, the receiver and contract holder are the same.
• Depending on the contract owner, the recipients are retired, rehired, reemployed, and contingent.
• The principal annuity amount is tax-free, while the rest is taxable as per Federal law.
• Beneficiaries, such as children or spouses, receive the recipient's benefits upon death.

Annuitant In Insurance Explained

Annuitants are entitled persons pre-decided by the annuity holder, i.e., the contract owner. The contract owner appoints them so that they receive the accumulated annuity on retirement. In most cases, beneficiaries are people who have applied for employee pension plans or life insurance policies. For example, civil servants might receive part of the annuity amount every month on retirement.

Annuities are guaranteed supplementary incomes after retirement. The number of recipients depends on the decision of the contract owner. For example, in the contract, the husband might add individuals like his wife, children, or elder parents as recipients. However, the contract owner cannot transfer the benefits to a trust, an institution, or a company.

Also, the owner has the right to select the type of contract. Based on types, it includes owner-driven and annuitant driven contracts. In the former, the benefits of the annuity receiver get passed to the beneficiary. But, in the annuitant driven contract, it gets terminated on its own. However, sometimes, the annuity payment continues until the receiver dies. Later, the surviving partner receives the amount.

History

Annuity receivers and annuities have been a part of human history for centuries. Ancient Egypt, Rome, and other parts of Europe dealt with annuities in 1100 BC. Also, some evidence suggests that the Legions of Rome granted annuity payments to military members when they retired at age 46.

Later, in the 8th century, churches and other religious bodies in England started paying land as annuity payments to the people. For instance, in 1308, the Abbot of St. Denis declared payment of $456.91 (400 livres) to the archbishop (priest). In a letter to Dutch mathematician Christian Huygens, mathematician Johann Hudde prepared the mortality table with the help of 1495 annuity recipients. By the late 1690s, a large annuity business had flourished. Likewise, the hype of annuity gave rise to the Laudable Society of Annuitants in 1776.

Types

Let us look at the types of annuitants in insurance and other possible areas:

#1 - Rehired Annuitant

The rehired annuitant is a retiree who is hired again by either the former employer or anyone else. As long as they meet the terms of their Wisconsin Retirement System (WRS) retirement, they can work again. Such individuals are entitled to receive monthly annuity benefits. However, already-received lump sum retirement benefits do not qualify them as rehired receivers.

#2 - Reemployed Annuitant

Reemployed annuitants are people working again who once retired from the Civil Service Retirement System (CSRS) or Federal Employee Retirement System (FERS). Some of them are civil servants like military officers, law enforcement officers, firefighters, and others. On reemployment, they continue to receive annuity benefits. However, the amount gets settled from their salary.

#3 - Retired Annuitant

A retired annuitant is a person who has surpassed their retirement age but continues to work with the former employer at their will. However, they must be CalPERS (California Public Employees Retirement System) retirees. Before joining, they must wait for 180 days after their retirement date. Besides, they will also be eligible for annuity benefits.

#4 - Contingent Annuitant

A contingent annuitant is a person selected by the recipient to receive the annuity payments after their death. Simply put, they are the second beneficiary of an annuity. In this case, both of them receive lower annuity amounts.

Is Annuitant Liable For Taxes?

Annuitants are liable to pay taxes on the received annuity amount. However, there are certain conditions where partial taxes are applicable. In simple words, the initial principal amount will be tax-free. After that, however, the remaining amount, i.e., the profit, will be taxable under Federal law. Further, if someone buys an annuity from their pre-tax income, it will again be taxed.

Example

Lets you look at an example to understand the concept better.

Suppose the annuitant is 35 years old and the annuity is transferrable to the person's partner, who is 30 years old; the insurance company will consider the number of years the partner will survive. Thus, the company will calculate the life expectancy and decide the premium amount. It will also calculate the monthly payment amount and the years the partner will survive according to their life expectancy.

Thus, the companies decide the payment amount to an annuitant based on the contract owner and the beneficiary's age and life expectancy.

Annuitant vs Owner vs Beneficiary vs Retiree

Although all the terms seem similar, they have a huge difference. The owner buys and invests in the annuity plan, whereas an annuitant receives the total amount in the future. On the other hand, the annuity benefits get passed on to the beneficiary on the recipient's death. Among all, the retiree's role is different. In contrast, others receive the annuity amounts, and retirees avail of the retirement plan benefits.

Based on responsibilities, only the contract owner has the right to buy the annuity plan. But, at the same time, the employer buys the investment plan for the employee until retirement. Additionally, only the owner has the power to modify the contract terms. However, they hold the right to terminate or cancel the contract.

	Annuitant	Owner	Beneficiary	Retiree
Meaning	A person who is entitled to receive a retirement pension or annuity amount.	Someone who buys the annuity plan. Also known as Contract holder.	A person is entitled to receive an annuity after the receiver's death.	A person who has retired or stopped working as an employee.
Right to purchase an annuity	May or may not be an annuity holder.	They hold the right to buy the annuity.	Cannot be an annuity holder.	Usually, employers apply for annuities on their behalf.
Changes	Cannot make changes.	Can make changes.	Cannot make changes.	Cannot make changes.
Termination	They can terminate the contract.	Can terminate the contract.	Cannot terminate the contract.	Can terminate the contract.

Frequently Asked Questions (FAQs)

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This has been a guide to Annuitant and its meaning. We explain its history, types, taxation, example, and comparison with owner, beneficiary, and retiree. You may also find some useful articles here -

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