Nationwide Receives Favorable IRS Private Letter Ruling on Taxation of Advisory Fees from Non-Qualified Annuities
New Milestone Cuts Costs and Complexity, Eliminates Key Friction Point, in Mission to Meet Unique Needs of RIAs, Fee-Based Advisors and the Clients They Serve
Louisville, KY – August 9, 2019 – Nationwide, one of the largest providers of insurance and financial services products in the U.S., today announced that it has received a favorable private letter ruling (PLR) from the Internal Revenue Service (IRS) with respect to the tax treatment of advisory fees paid from non-qualified annuities. The new ruling concludes that the payment of an advisory fee from a variable, fixed indexed, or hybrid non-qualified annuity can be structured to not give rise to a taxable distribution. This is a new milestone for Nationwide in their commitment to serve advisors and their clients in whatever way they want to be served, including no-load annuities with fee-management and integration capabilities designed expressly to fit the way RIAs and fee-based advisors work.
“Nationwide has been committed to achieving this favorable ruling on behalf of RIAs, fee-based advisors and their clients, and now can provide them with an important benefit that they have been seeking for years,” said Craig Hawley, Head of Nationwide Advisory Solutions. "While Nationwide Advisory Solutions has always been one of the only carriers with a technology platform that gives advisors an automated solution to be paid their fee directly from the annuity, this favorable ruling on the tax-treatment of advisory fees is another milestone in our mission to truly meet the unique needs of RIAs, fee-based advisors and the clients they serve.”
This new IRS ruling essentially conforms the tax treatment of properly structured advisory fees from non-qualified annuities with those from qualified accounts such as 401(k)s, 403(b)s and IRAs, which typically are not treated as taxable distributions. By securing this new ruling, Nationwide helps cut costs and complexity and eliminates a key friction point, allowing RIAs and fee-based advisors to incorporate insurance and annuities into the holistic planning process, to help their clients prepare for and live in retirement.
Among important guidelines cited in the ruling, the advisory fees for the non-qualified annuity cannot exceed 1.5% of its cash value. The ruling applies only to fee-based non-qualified annuities, where the advisor does not receive a commission related to the sale. The fee is paid with respect to the investment advice received by the contract owner specifically related to the non-qualified annuity.
Nationwide Advisory Solutions is the innovator of Nationwide Advisory Retirement Income AnnuitySM (NARIA)SM, one of the industry’s first variable annuities (VAs) with an income guarantee designed expressly for RIAs and fee-based advisors including fee-management capabilities that will not erode the client’s benefit base. Jefferson National, now doing business as Nationwide Advisory Solutions, is the innovator of Monument Advisor, the industry’s first Flat-Fee Investment Only Variable Annuity (IOVA).
In addition to pioneering product design, Nationwide Advisory Solutions has developed an innovative end-to-end process adopted by more than 6,500 RIAs and fee-based advisors for more holistic financial planning. It features an online application, web-enabled account management and fee-management, comprehensive integration capabilities with more than 95 percent of all fee-based advisory platforms and technologies, including direct data feeds into the advisor’s workstation. Nationwide Advisory Solutions’ award-winning advisor experience is built using advanced analytics and artificial intelligence, based on more than a decade of expertise in meeting the unique needs of RIAs and fee-based advisors.
About Nationwide Advisory Solutions
Nationwide Advisory Solutions is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. Nationwide Advisory Solutions does this by developing and delivering value-added investment products, services and technologies that dovetail with fiduciary obligations—wrapped in an industry-leading customer experience. To learn more, please visit www.nationwideadvisory.com
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.
Not a deposit. Not FDIC or NCUSIF insured. Not guaranteed by the institution. Not insured by any federal government agency. May lose value.
All guarantees and protections are subject to the claims paying ability of the issuing company.
An investor should carefully consider the investment objectives, risks, charges and expenses of the investment before investing or sending money. For a prospectus and underlying fund prospectuses containing this and additional information, please contact your financial professional or visit www.nationwideadvisory.com. Read it carefully before investing. The summary of product features is not intended to be all-inclusive. Restrictions may apply. The contracts have exclusions and limitations, and may not be available in all states or at all times.
Variable annuities are investments subject to market fluctuation and risk, including possible loss of principal. Your units, when you make a withdrawal or surrender, may be worth more or less than your original investment.
Variable annuities are long-term investments to help you meet retirement and other long-range goals. Withdrawals of tax-deferred accumulations are subject to ordinary income tax. Withdrawals made prior to age 59½ may incur a 10% IRS tax penalty. Nationwide does not offer tax advice
Advisory fees cannot be withdrawn from an annuity issued to a North Dakota resident.
Nationwide Advisory Retirement Income Annuity is a variable annuity issued by Nationwide Life Insurance Company, Columbus, Ohio. The general distributor is Nationwide Investment Services Corporation, member FINRA. Products might not be available in all states or territories.
Monument Advisor is issued in all states, except NY, by Jefferson National Life Insurance Company (Louisville, KY). In New York, Monument Advisor is issued by Jefferson National Life Insurance Company of New York (New York, NY). The general distributor is Jefferson National Securities Corporation, FINRA member. All companies are affiliates of Nationwide Life Insurance Company.
Nationwide, the Nationwide N and Eagle, Nationwide is on your side, Nationwide Advisory Retirement Income Annuity and NARIA are service marks of Nationwide Mutual Insurance Company. © 2019 Nationwide.
Each adjustment for amounts subsequently surrendered will reduce the living benefit in the same proportion the contract value was reduced on the date of the partial surrender.
Mogel, Gary S. (2005, June 6), Flat-fee variable annuity makes its debut. Investment News. Retrieved from http://www.investmentnews.com/article/20050606/SUB/506060708
Jefferson National’s Monument Advisor has a $20 monthly flat insurance fee. Additional low-cost fund platform fees ranging from .10% - .35% will be assessed for investors wishing to purchase shares of low-cost funds. See the prospectus for details.
2018 WealthManagement.com Innovation Award.