QLAC Rules: Premium Cap, RMD Impact, and Payout Deadlines

A Qualified Longevity Annuity Contract, or QLAC, lets you move up to $210,000 in 2026 from a traditional retirement account into a fixed deferred annuity that must begin paying by age 85, and the QLAC rules exclude that sheltered amount from your required minimum distribution calculation until payments start.¹ The IRS, Treasury regulations, and SECURE 2.0 set the boundaries on how much you can contribute, which accounts qualify, what the contract has to look like, and when the income has to begin.

The $210,000 Lifetime Premium Cap

For 2026, the most you can put into QLACs across all your retirement accounts is $210,000, a figure the IRS adjusts annually for inflation.¹ SECURE 2.0 eliminated the earlier 25%-of-balance ceiling, so the dollar cap now stands alone. That change opened QLACs to people with smaller portfolios who want to lock in a larger share of their savings as guaranteed late-life income.

The cap is a lifetime limit per person, not per account. If you own a traditional IRA and also participate in a 401(k), the combined premiums across both cannot exceed $210,000. Married couples each get their own $210,000, so a couple could collectively shelter up to $420,000 from RMD calculations using their respective accounts.

Which Retirement Accounts Qualify

Not every retirement account can hold a QLAC. Eligibility is limited to 401(a) plans (including 401(k) plans), 403(a) and 403(b) plans, traditional IRAs and SEP IRAs under section 408, and eligible governmental 457(b) plans.²

Roth IRAs are explicitly excluded. The IRS instructions define a QLAC as a contract purchased under section 408 accounts “other than a Roth IRA.”² Roth IRAs have no lifetime RMDs for the owner, so the main tax reason to use a QLAC would be moot. Inherited IRAs are also ineligible, because the rules define the purchaser as the original account owner.

How a QLAC Reduces Your Required Minimum Distributions

Once you turn 73, you have to begin taking RMDs from your traditional retirement accounts each year, whether you need the money or not. Every dollar of those distributions is taxable income. A QLAC carves out part of your account balance before the RMD math runs. If your traditional IRA holds $800,000 and you put $210,000 into a QLAC, your RMD is calculated on $590,000 instead.

The IRS excludes the QLAC’s value from your account balance for RMD purposes from the moment you purchase it until the annuity starting date.² During that deferral period, you pay no tax on the sheltered amount. Once the QLAC begins paying, those payments count as taxable income like any other distribution from a traditional retirement account. You are not avoiding the tax. You are moving it to a later date when the guaranteed income may be more useful and your overall bracket may be lower.

When Payments Must Start

Treasury regulations require QLAC payments to begin no later than the first day of the month after you turn 85.² That is a hard ceiling. You pick your start date when you buy the contract, and the regulations set no minimum age. In practice, most carriers offer start dates from around age 75 up to 85.

The longer you defer, the larger each payment will be, because the insurance company has more time to invest your premium and fewer expected years of payouts. The tradeoff is that you give up access to that money for the entire deferral period. QLAC contracts are irrevocable, carry no cash surrender value, and don’t allow early withdrawals.

Required Contract Provisions

A deferred annuity does not automatically qualify as a QLAC. The contract has to satisfy several specific requirements set out in Treasury regulations, and missing any one of them costs the contract its favorable tax treatment.

Only fixed annuities qualify. Variable annuities, indexed annuities, and similar products are out.³
The contract itself, or a rider attached to it, must state that it is intended to be a Qualifying Longevity Annuity Contract.³
After the required beginning date, the contract cannot offer any commutation benefit, cash surrender right, or similar feature that would let you trade the annuity stream for a lump sum.²
The contract must name a specific annuity starting date, no later than age 85.

There is one narrow exception to the irrevocability rule. You can rescind a QLAC within 90 days of purchase without disqualifying it. This free-look window lets you back out shortly after buying, though the regulations don’t spell out refund terms; those depend on the insurer and your state’s insurance laws.²

Correcting an Excess Premium

If you accidentally put more than $210,000 into QLACs across your accounts, the contract that pushed you over the limit stops being a QLAC as of the date that excess premium was paid. Its full value snaps back into your account balance for RMD purposes, which can trigger a shortfall if you have already calculated your RMDs without it.³

You can fix this by returning the excess premium to the non-QLAC portion of your retirement account by the end of the calendar year following the year of the overpayment.² Correct it within that window, and the IRS treats the contract as though it never went over the limit. Miss the deadline, and the account balance for the year of the overpayment has to be recalculated upward to include the excess, potentially creating an RMD shortfall with its own penalties.

Spousal and Beneficiary Protections

A QLAC can include a joint-life option that continues payments to your surviving spouse after your death. The survivor’s payment cannot exceed 100% of what you were receiving; it can match your payment but cannot increase.² Many contracts offer a reduced survivor benefit, such as 50% or 75% of the original payment, in exchange for a higher payout while both spouses are alive.

If you die before the annuity start date, the contract can include a return-of-premium feature. SECURE 2.0 removed regulatory barriers that previously made this benefit harder for plans to offer. Under a return-of-premium provision, your designated beneficiary receives the total premiums paid minus any payments already made.

When a designated beneficiary inherits a QLAC and the owner dies before the annuity start date, any life annuity payable to that beneficiary has to begin no later than the last day of the calendar year following the year of death.² A return-of-premium payment made after the required beginning date is treated as an RMD for the year it is paid and cannot be rolled over into another retirement account.

Tax Reporting on Form 1098-Q

The insurance company that issues your QLAC has to file Form 1098-Q with the IRS and send you a copy every year, starting with the year you first pay premiums and continuing until you turn 85 or die.⁴ You don’t file Form 1098-Q with your tax return, but you should keep it with your records. The form reports your scheduled annuity start date, cumulative premiums paid, and the fair market value of the QLAC at year-end. Your IRA custodian or plan administrator uses the fair market value figure to exclude the QLAC from your account balance when calculating RMDs, so if the numbers don’t line up, catch it before filing season.

1
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
2
Internal Revenue Service. Instructions for Form 1098-Q
3
Federal Register. Longevity Annuity Contracts
4
Internal Revenue Service. Instructions for Form 1098-Q