Annuity contracts
(5) Annuity contracts(i) Purchase of annuity contract permitted. A plan may satisfy section 401(a)(9) by the purchase of an annuity contract from an insurance company in accordance with 1.401(a)(9)-6(d) with the employee's entire individual account, provided that the terms of the annuity satisfy 1.401(a)(9)-6. However, a distribution of an annuity contract is not a distribution for purposes of this section. (ii) Transition from defined contribution rules to defined benefit rules. If an annuity is purchased in accordance with paragraph (a)(5)(i) of this section after distributions are required to commence (the required beginning date, in the case of distributions commencing before death, or the calendar year determined under 1.401(a)(9)-3(c)(4) or, if applicable, 1.401(a)(9)-3(d), in the case of distributions commencing after death), then the plan will satisfy section 401(a)(9) only if, in the year of purchase, distributions from the individual account satisfy this section, and for calendar years following the year of purchase, payments under the annuity contract are made in accordance with 1.401(a)(9)-6. Payments under the annuity contract during the year in which the annuity contract is purchased are treated as distributions from the individual account for purposes of determining whether the distributions from the individual account satisfy this section in the calendar year of purchase. (iii) Bifurcation if annuity contract is purchased with portion of employee's account. A portion of an employee's account balance under a defined contribution plan is permitted to be used to purchase an annuity contract while another portion remains in the account, provided that the requirements of paragraphs (a)(5)(i) and (ii) of this section are satisfied (other than the requirement that the contract be purchased with the employee's entire individual account). In that case, in order to satisfy section 401(a)(9) for calendar years after the calendar year of purchase, the remaining account balance under the plan must be distributed in accordance with this section. (iv) Optional aggregation rule. In the case of an annuity contract purchased with a portion of the employee's account balance, in lieu of applying section 401(a)(9) separately with respect to the annuity contract and the remaining account balance as described in paragraph (a)(5)(iii) of this section, a plan may permit an employee to elect to satisfy section 401(a)(9) for the annuity contract and that account balance in the aggregate by (A) Adding the fair market value of the contract to the remaining account balance determined under paragraph (b) of this section; and (B) Treating payments under the annuity contract as distributions from the employee's individual account. (v) [Reserved] (6) Impact of additional distributions in prior years. If, for any distribution calendar year, the amount distributed exceeds the required minimum distribution for that calendar year, no credit towards a required minimum distribution will be given in subsequent calendar years for the excess distribution.