At the urging of the American Council of Life Insurers (ACLI), Washington, D.C., the Internal Revenue Service has issued new guidance that will provide annuity policyholders under age 59 more flexibility in taking distributions from annuity contracts.In Notice 2004-15, the IRS says that annuitants age 59 or younger who are receiving annuity payments --a regular stream of income--from a life insurance company can revisit their insurer to restructure their payment plans. In effect, the IRS guidance allows these annuitants to restructure their payment schedules to take advantage of changing market conditions.

Prior to Notice 2004-15, these annuitants had only one opportunity to establish their payment schedule, based on their expected mortality and the accumulated amount in the contract. They would face a 10% federal income tax penalty for "early withdrawals" if they restructured their arrangements.

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