Rev. Rul. 62-216

SECTION 1. PURPOSE.

.01 The purpose of this Revenue Ruling is to provide additional annuity rates for use with Revenue Ruling 62-137, page 28. That Revenue Ruling prescribes a standard to be used in evaluating for Federal tax purposes the annuity agreements issued from time to time by an organization such as a corporation, trust, fund or foundation (other than a commercial insurance company) in exchange for money or other property. It also contains an annuity rate table (single life) for ages 32 to 85, inclusive.

.02 Since publication of that Revenue Ruling, a feasible tabular method has been found for evaluating ordinary joint and survivor annuities (two lives) according to the prescribed standard. This method is illustrated and explained hereinafter. At the same time, it has become apparent that the range of single life rates should be extended.

SECTION 2. SINGLE LIFE ANNUITY PAYABLE ANNUALLY.

Table A shows the rate for an annuity (single life) of $1.00 per annum payable annually at the end of each year during the life of an annuitant of specified age and sex. Thus, the table shows that the rate for a male aged 56 is $15.089. This means that the value, according to the prescribed standard, of an annuity of $1,000 per annum payable annually during the life of a male annuitant aged 56, first payment one year hence, is $1,000 times 15,089 or $15,089.

SECTION 3. ANNUITY PAYABLE OTHER THAN ANNUALLY.

Whether the annuity is a single life or a joint and survivor annuity, to obtain the rate for $1.00 per annum payable in equal installments at the end of each:

(a) monthly period, add $0.482 to the annual rate.

(b) quarterly period, add $0.395 to the annual rate.

(c) semiannual period, add $0.263 to the annual rate.

Thus, the rate for an annuity of $1.00 per annum payable quarterly during the life of a male annuitant aged 56, first payment three months hence, is $15,089 (annual rate from Table A), plus 0.395, or $15.484. Accordingly, if the annuity were in the amount of $1,000 per annum, payable quarterly, its value, according to the prescribed standard, would be $1,000 times 15.484, or $15,484.

SECTION 4. PARTIAL JOINT LIFE PREMIUM (TWO LIVES).

.01 A necessary step in the computation of a joint and survivor annuity rate, shown in section 5, is to determine an ancillary value, which is hereinafter referred to as the `partial joint life premium.' This step of the computation utilizes Tables B and C.

.02 If one or both of the annuitants is female, it is necessary, before entering Tables B and C, to substitute for each female annuitant a male annuitant 4 years younger; that is, to subtract 4 years from the age of each female annuitant. Tables B and C are then used with male ages only, either actual or substituted.

.03 An `equivalent equal age' corresponding to any two male ages can be determined by means of Table B. This age will consist of a whole number and a decimal. Straight line interpolation between two adjacent premiums in Table C will then give a value, corresponding to the `equivalent equal age,' which is the partial joint life premium to be used in the larger computation, section 5, step (2).

Example 1 . The partial joint life premium for a male annuitant aged 65 and a female annuitant aged 60 is $9,855, obtained as follows:

 Actual ages................................    65 Male  60 Female

SECTION 5. JOINT AND SURVIVOR ANNUITY PAYABLE ANNUALLY (TWO LIVES.)

.01 The method of computing the rate for an annuity payable annually during the joint lives and the life of the survivor of two persons (a `joint and survivor annuity') is necessarily somewhat involved.

The method consists of the following steps:

(1) Find the sum of the two single life rates separately applicable to the annuitants, these rates being taken from Table A.

(2) Compute the appropriate `partial joint life premium,' using Tables B and C and the method outlined in section 4.

(3) Subtract Item (2) from Item (1) to obtain the `unadjusted joint and survivor rate.'

(4) Extract from Table D the two adjustment factors corresponding to the age and sex of the individual annuitants.

(5) From the unadjusted joint and survivor rate, Item (3), subtract whichever of the adjustment factors of Item (4) is the smaller . (If these factors are equal, subtract the amount of one of them.)

The result is the desired rate, that is, the rate for an annuity of $1.00 per annum payable annually during the joint lives and the life of the survivor of the two annuitants, first payment one year hence.

Example 3 . The rate for an annuity of $1.00 per annum payable annually during the joint lives and the life of the survivor of a male annuitant aged 65 and a female annuitant aged 60 is $17.082, obtained as follows:

     Single life rate, age 65M, from Table A................. $11.469

Example 4. The rate for an annuity of $1.00 per annum payable annually during the joint lives and the life of the survivor of two female annuitants aged 69 amd 60 is $17.161, obtained as follows:

     Single life rate, age 69F, from Table A................  $11.627

Example 5 . The rate for an annuity of $1.00 per annum payable annually during the joint lives and the life of the survivor of two male annuitants aged 65 and 56 is $16.640, obtained as follows:

     Single life rate, age 65M, from Table A................  $11.469

.02 for the method of adjusting the joint and survivor rate in cases where the annuity is payable in semiannual, quarterly, or monthly installments, see section 3.

SECTION 6. RATES SUBJECT TO CHANGE.

Tables A, B, C and D are subject to change depending upon market conditions. Notice of change will be given by publication in the Internal Revenue Bulletin.

SECTION 7. EFFECT ON OTHER DOCUMENTS.

This Revenue Ruling supplements Revenue Ruling 62-137, page 28, and facilitates the valuation of certain annuity agreements according to the standard prescribed therein.

                                TABLE A