Retirees holding traditional IRAs or employer-sponsored plans can shield a portion of their savings from annual required minimum distributions by purchasing a qualified longevity annuity contract, with payouts deferred as late as age 85. Treasury created the QLAC category in 2014, and Congress expanded its reach through the SECURE 2.0 Act signed into law as part of the Consolidated Appropriations Act, 2023. Final regulations published in 2024 removed the old 25 percent cap on how much of an account could go into a QLAC, raised the inflation-adjusted dollar ceiling, and added a 90-day buyer rescission window, all of which make larger single-premium purchases possible for the first time.
Why the lifted QLAC cap changes retirement math
Before the 2024 rule changes, account holders faced a dual constraint: they could put no more than 25 percent of their qualified account balance, up to a fixed dollar limit, into a QLAC. That percentage ceiling forced retirees with large balances to leave substantial sums exposed to annual RMD calculations even when they did not need the income. The Treasury Decision 10001 final regulations eliminated the percentage limitation entirely, so the only remaining guardrail is the inflation-adjusted dollar cap. For retirees who previously maxed out at 25 percent, the practical effect is that they can now commit a much larger lump sum to a deferred annuity and keep those dollars out of the RMD base until payments begin.
The timing matters because RMD starting ages have also shifted upward under SECURE 2.0, giving savers additional years of tax-deferred growth. When a retiree pairs a later RMD trigger with a QLAC that delays payouts to age 85, the combined deferral window stretches well beyond what was available a decade ago. That combination creates a strong incentive for larger single-premium contracts among people who want guaranteed income in their mid-80s without draining their accounts through forced withdrawals in their early 70s.
For investors trying to understand how these contracts fit into their planning, the SEC’s investor education site defines a qualified longevity annuity as a type of deferred income annuity purchased within a retirement plan or IRA that begins payments at an advanced age, typically well after retirement. Because the premium is paid up front and benefits are delayed, the contract can generate relatively high monthly income later in life compared with starting payments earlier. The trade-off is illiquidity: once the rescission period closes, most QLACs cannot be surrendered for cash, so the decision to allocate a larger share of retirement assets under the new cap is effectively permanent.
Regulatory record behind QLAC deferral to age 85
The Treasury announcement of the 2014 final rules explicitly tied QLAC treatment to relief from RMD compliance concerns under Internal Revenue Code section 401(a)(9). Those rules, codified in the regulations at section 1.401(a)(9)-6 A-17 and published in the Federal Register at 79 F.R. 37633, established that money placed in a qualifying contract would be excluded from the account balance used to calculate annual distributions. That exclusion is what allows retirees to remove the QLAC premium from the RMD formula until the contract’s income start date, even though the funds remain inside the tax-deferred retirement system.
The IRS reinforced this framework through Form 1098-Q, which insurers must file for each contract holder. According to the official instructions, revised in April 2025, the annual QLAC reporting period generally ends when the individual reaches age 85 or dies, confirming that the deferral window can run that long. The instructions describe how issuers report the contract’s value and annuity starting date, and they clarify that once payments commence, the contract is no longer treated as a QLAC for reporting purposes. This administrative record matches the regulatory intent: to carve out a slice of retirement assets that can be converted into late-life income while remaining outside the RMD base until the agreed-upon age.
Congress directed Treasury to update the QLAC rules through Division T of the SECURE 2.0 legislation included in the Consolidated Appropriations Act, 2023, which raised the statutory dollar limit and instructed regulators to simplify and broaden access. Treasury Decision 10001 implemented those directives by eliminating the 25 percent cap, indexing the maximum premium for inflation, and creating a uniform 90-day free-look period during which buyers can unwind a purchase without adverse tax consequences. Together, these changes mark a turning point for longevity insurance inside qualified plans: retirees with substantial IRA or 401(k) balances can now move a much larger amount into a contract that delays income to age 85, potentially smoothing taxes and providing a hedge against outliving their savings, while still operating within a clearly defined regulatory and reporting framework.
