Annuity Dilemma

[Silver]

My DS (sister) is 3 years older than I, and has had two annuities in two different companies for many years. One is a fixed at 2.9% and one is a variable with balanced funds and has done OK in the past few years. Both are non-qualified accounts.

I know this group dislikes annuities for many good reasons, but it is what it is so please hear me out and hopefully make some helpful suggestions.

My DS is nearing the age when she wants to start distributions from these annuities. They are worth about $350k combined and they comprise about 25% of her total investments, the rest being in IRA's.

Her plan was to move the fixed into the variable (knowing she cannot add funds to the fixed as per the contract) using a 1035 transfer. Then...when hopefully fixed annuities get better rates, move the combined amount into a fixed and start distributions.

The date that there was no penalty to move funds from the fixed was mid-February, so she contacted the company that has the variable annuity and started the 1035 transfer. She knew she had 30 days to make this happen, and was on top of it the entire time, and has emails to prove it. However, the transfer never happened. It just did not happen.

The receiving company said they mailed the 1035 and letter of acceptance 3 times, faxed them twice, and emailed it once. The company that has the fixed annuity that was to be transferred says they never got anything. Nothing. So they cannot move the money. She has many emails saying all of this.....and now both companies have ghosted her....not answering emails and customer service calls go totally unanswered at one company, and the other says they cannot help her. Transamerica has the variable and Sentinel Security has the fixed.

I have never heard of such a thing. She is now past the 30 days window to move the funds....so although she hasn't lost a cent, her plan is screwed.

Please no judgements.....I know this isn't a great plan but I love my sister and would like to help. Any ideas what to do from here?

 

[JoeWras]

Ghosting? Maybe time to talk to the insurance regulator in her state? Just an idea.

 

[pb4uski]

....One is a fixed at 2.9%...

Yes, what you described is very odd.

Is the Security Sentinel annuity still paying 2.9%? or has the term over which it paid 2.9% expired? If the latter, what is the fixed annuity currently paying for interest?

What is the 30-day window about?

Your sister could file a complaint with her state insurance department that the Security Sentinel is not responding to Transamerica's numerous requests for a 1035 transfer. At the same time, send a certified letter to the CEO of Security Sentinel explaining the situation and advise him/her that you have filed a complaint with your state's insurance department. In both cases, get copies of the documents that Transamerica has send to Security Sentinel that Security Sentinel claims to have not received.

Has Transamerica sent the request by certified mail so they have proof that the Security Sentinel received the request?

I'm surprised that someone from Transamerica hasn't talked by phone with their counterpart at Security Sentinel and sorted the whole thing out, but perhaps the Security Sentinel counterpart is ghosting them too.

 

[Jerry1]

Ghosting? Maybe time to talk to the insurance regulator in her state? Just an idea.

Exactly what I was thinking.

 

[Silver]

Thank you for all the comments. My DS's five year personal annuity at 3% interest with Sentinel Security ended in mid February meaning she can renew at 2.9%, or defund the annuity at no penalty. It has auto renewed to 2.9% at this point. She wanted to move it into her variable with Transamerica, and only had a 30 day window to do that by law which has now expired.

She submitted the 1035 to a customer service rep at Transamerica on 12-31-20 so that it could be submitted to Sentinel Security long before the maturity date of 2-19-21. She has the email. That is when the 30 days starts to count down.

After many calls and emails (20 +) Sentinel says they got nothing. Transamerica says they mailed the acceptance letter and 1035 three times, faxed it twice, and emailed it once. All the acct numbers, fax numbers, addresses have been checked numerous times. None of this makes sense. Neither company is even trying to resolve this....not at all.

My DS is ready to contact the state insurance regulator, but who should she contact? The insurance regulators in the states where both companies are, or the Michigan state regulator where she lives? She lives in Michigan. The two insurance companies are each in other states. Who does she contact?

Thank you. Such as strange situation.

 

[jazz4cash]

She needs to contact the regulator in the state where she resides. Good luck.

 

[pb4uski]

+1 in the state where she lives.

But, 2.9% for relatively safe money is a pretty good rate... I would have left it there....they may have done her a favor.

 

[racy]

Ghosting? Maybe time to talk to the insurance regulator in her state? Just an idea.

^this^
My DW is a paralegal. She has similar stories about getting cooperation for (some) insurance companies.

 

[VanWinkle]

+1 in the state where she lives.

But, 2.9% for relatively safe money is a pretty good rate... I would have left it there....they may have done her a favor.

^^^^This 2.9 ain't bad for sure

 

[Silver]

If it were my annuity I would have just left it for the 2.9%. I didn't know anything about either of these annuities until a couple days ago when she called me for advice.

Thank you for the feedback. I'm going to recommend that she leave the fixed where it is at this point and just plan to take distributions from the two annuities. Not as neat and tidy as she would like....but she still can move the variable to a fixed in the future when (if) rates improve. She can decide if she wants to pursue a complaint with the Michigan state insurance commissioner. If it were me....I would. Especially since she has everything in emails.

Thanks again

 

[retired1]

This sounds scary and unbelievable. Not sure what actions to take but certainly shows the crookedness of insurance companies involved. Good luck. Keep us posted.

 

[retired1]

^^^^This 2.9 ain't bad for sure

+1

 

[capjak]

MYGAs/Fixed Annuity/Defferred Annuity/SPIA are all good products if they meet your need and have typically have no fees (fee baked into the interest rate/return, just like a CD but without the FDIC insurance).

The Fixed rate MYGA at 2.9% is a good rate and many of these allow 10% of balance and/or accrued interest withdrawals per year without a surrender charge.

However some do not allow a withdrawal without a surrender charge, since she renewed the MYGA (Fixed annuity) I believe her surrender charge would start over for the 5 year period.

Please check that.

 

[pb4uski]

This sounds scary and unbelievable. Not sure what actions to take but certainly shows the crookedness of insurance companies involved. Good luck. Keep us posted.

You're painting with a pretty broad brush since we only know one, second-hand account of the situation.... for all we know there might be a good reason for the impasse.

Even if it is what was reported to then extrapolate it to that insurance companies are crooked it truly ignorant.

 

[Silver]

It is a very strange situation. My sister has absolutely no idea why the 1035 was never acted on, and cannot get an answer from either company. Once she started asking for a supervisor or manager to speak to, both companies stopped responding to her emails.

She has called customer service at both companies numerous times. Transamerica has phone que lines of well over 2 hours, and she has never spoken to a human there. Sentinel is not nearly as bad, but their customer service just says they have no record of any request to a change in her account.

She does plan to submit a complaint to the Michigan insurance regulator. I'll let you know if anything comes about from it.

 

[pb4uski]

Too bad that these are not qualified accounts because she could just withdraw and then deposit the withdrawal into the other account as a rollover contribution. I'm guessing that the autorenewal at 2.9% also started a new withdrawal penalty schedule so that would be an issue too. While I don't have any MYGAs all my CDs are set to NOT automatically renew as I'd rather thave the flexibility of cash if I sleep theough a maturity than get stuck in a renewal that has a early redemption penalty.

 

[Souschef]

DW has an annuity that matures in 2015. It is very conservative, because she is not a risk taker. She does not need the money, so has not done any yearly withdrawals.
The value today is about $200K, but the surrender value is $189K. My feeling now is to let it mature and take the entire distribution. I will have her withhold 10% for federal taxes. I would the suggest she split the proceeds between her 2 sons. We will have to do a 709, but I have done them before.
Any thoughts?

 

[TheWizard]

DW has an annuity that matures in 2015. It is very conservative, because she is not a risk taker. She does not need the money, so has not done any yearly withdrawals.
The value today is about $200K, but the surrender value is $189K. My feeling now is to let it mature and take the entire distribution. I will have her withhold 10% for federal taxes. I would the suggest she split the proceeds between her 2 sons. We will have to do a 709, but I have done them before.
Any thoughts?

2015 was six years ago...

 

[Chuckanut]

2015 was six years ago...

I'll be it's a case of fumble fingers and Souschef meant 2025.
I get fumble fingers all the time.

 

[jazz4cash]

I know there are a gazillion variations but I believe most fixed annuities have a minimum interest rate that is effective after maturity if you do not cash it out. These may be much lower than the contract rate but with the alternatives being dismal it may be worth leaving the money with the insurer and withdraw as needed. The 5 yr MYGA I just acquired pays 3.05 pct during the guarantee period. After that it pays a flat 1 pct (for 30 yrs, I think). There is a good chance that 1% will be a decent rate in 5 yrs. At least it won’t be too painful while I find a new home for those funds. So I say dig deep into the details of your annuity to fully understand what it offers.

 

[Sunset]

I know there are a gazillion variations but I believe most fixed annuities have a minimum interest rate that is effective after maturity if you do not cash it out. These may be much lower than the contract rate but with the alternatives being dismal it may be worth leaving the money with the insurer and withdraw as needed. The 5 yr MYGA I just acquired pays 3.05 pct during the guarantee period. After that it pays a flat 1 pct (for 30 yrs, I think). There is a good chance that 1% will be a decent rate in 5 yrs. At least it won’t be too painful while I find a new home for those funds. So I say dig deep into the details of your annuity to fully understand what it offers.

Agreed, I've seen a dismal annuity that now looks nice as it pays 2% per yr.

 

[Souschef]

Thank you for the advice. I did mean 2025

 

[Silver]

OP here just doing a follow up.

The annuity has never been transferred because Sentinel Security (where it is now) still insists they never received a 1035 from Transamerica to move it. Transamerica insists they sent the completed 1035 and letter of acceptance five times....3 by mail, 2 by fax, once by email.

My sister has opened a complaint with the Michigan Department of Financial Services which manages insurance concerns. They told her they are submitting inquires to both companies, and they have 20 days in which to respond.

Meanwhile, the fixed annuity contract has renewed at Sentinel for another five years at 2.9% interest. I asked her to check that interest again because so many of you were impressed at that amount....and yep...she emailed me a copy of the renewal letter stating 2.9% for five years. She agrees this whole thing could have been in her favor, but is still angry that her instructions weren't followed.

 

[MarieIG]

OP here just doing a follow up.

The annuity has never been transferred because Sentinel Security (where it is now) still insists they never received a 1035 from Transamerica to move it. Transamerica insists they sent the completed 1035 and letter of acceptance five times....3 by mail, 2 by fax, once by email.

My sister has opened a complaint with the Michigan Department of Financial Services which manages insurance concerns. They told her they are submitting inquires to both companies, and they have 20 days in which to respond.

Meanwhile, the fixed annuity contract has renewed at Sentinel for another five years at 2.9% interest. I asked her to check that interest again because so many of you were impressed at that amount....and yep...she emailed me a copy of the renewal letter stating 2.9% for five years. She agrees this whole thing could have been in her favor, but is still angry that her instructions weren't followed.

I suspect that now that the Michigan Department of Financial Services has gotten involved; the issue will be resolved.