The SECURE 2.0 Act of 2022 created a new option for IRA owners: a one-time qualified charitable distribution (QCD) of up to $55,000 directly from an IRA to fund a charitable gift annuity. The transfer is tax-free, can fulfill some or part of your required minimum distributions (RMD) and secures fixed lifetime payments from the Pomona Plan.

Dozens of Pomona Plan participants took advantage of this option in 2023, the first year it was available.

Jump to: What Is an IRA Gift Annuity? | Who Qualifies? | Calculate Your Payments | How It Works | Key Rules & Parameters | How It Compares | Real World Example | FAQ | Let’s Talk

What Is an IRA Charitable Gift Annuity?

An IRA charitable gift annuity is a planned giving arrangement that allows IRA owners age 70½ or older to transfer up to $55,000 directly from an IRA to fund a charitable gift annuity (CGA). The transfer is not treated as taxable income, and it counts as a qualified charitable distribution (QCD) that can satisfy all or part of your required minimum distribution (RMD) for the year. 

Like a standard Pomona Plan CGA, the annuity provides fixed, reliable payments for life, backed by the full financial resources of Pomona College.

Who Qualifies for an IRA Gift Annuity?

An IRA charitable gift annuity may be a strong fit if you:

• Are age 70½ or older with funds in a traditional IRA
• Have IRA assets you don't need for current expenses but want to put to work more efficiently
• Want to satisfy your required minimum distribution (RMD) while avoiding taxes on that income
• Want fixed, guaranteed payments for life backed by Pomona College
• Want to make a meaningful gift to Pomona without writing a check
• Would benefit from converting pre-tax IRA funds into a structured income stream

How Does an IRA Gift Annuity Work?

1. You direct your IRA custodian to transfer funds. You instruct your IRA custodian to make a direct qualified charitable distribution (QCD) of up to $55,000 to Pomona College. The transfer goes directly from your IRA to Pomona.
2. The distribution is not treated as taxable income. Unlike a standard IRA withdrawal, a QCD is excluded from your gross income in the year of the transfer. Note that because the funds were never taxed, you do not receive an additional charitable income tax deduction: the income exclusion itself is a significant tax benefit.
3. The transfer counts toward your RMD. The QCD satisfies all or part of your required minimum distribution for the year, making it an especially efficient use of funds you may not need for living expenses.
4. Pomona pays you for life. In exchange for your IRA gift, Pomona College pays you a fixed amount each year for life at standard Pomona Plan annuity rates. Payments must commence within one year of the funding date. Because the IRA funds were never previously taxed, payments are 100% taxable as ordinary income when received.
5. The annuity can cover you and your spouse. Payments can benefit the IRA account owner, the owner's spouse or both individuals.

Key Rules and Parameters for 2026

• Maximum QCD amount: $55,000 in 2026
• Minimum age: 70½ at the time of the distribution
• One-time use: The provision may only be used once, making it worth using the full $55,000 in most cases
• Payment timing: Annuity payments must begin within one year of the funding date
• Taxation of payments: 100% taxable as ordinary income (no tax-free portion as IRA funds have not been previously taxed)
• No charitable deduction: The QCD is excluded from income but does not generate a separate charitable income tax deduction
• RMD credit: The transfer counts toward your required minimum distribution for the year
• Eligible accounts: Traditional IRAs; does not apply to 401(k)s, 403(b)s or other employer retirement plans

IRA Gift Annuity vs. Standard Charitable Gift Annuity

Both arrangements provide fixed lifetime income backed by Pomona College, but the tax treatment differs in one important way.

With a standard charitable gift annuity (CGA) funded with cash or appreciated securities, you receive an immediate charitable income tax deduction, and a portion of each payment is typically tax-free for many years.

With an IRA charitable gift annuity, you receive no charitable deduction. Instead, the transfer itself is excluded from your gross income, which can be equally or more valuable depending on your tax situation. Because IRA funds were never taxed, all payments are fully taxable as ordinary income when received.

For those with substantial IRA balances who face large RMDs, the IRA gift annuity can be the more efficient route as it converts funds that would otherwise generate taxable income into a structured lifetime income stream with no out-of-pocket cost.

Real-World Example: Converting a Required Minimum Distribution into Lifetime Income

Consider Alan, a 75 year old who would like to make a special contribution to support Pomona College. Alan has substantial assets in his IRA, and he knows that he is facing a RMD this year. Even though he doesn’t really need the income, Alan knows that his RMD is going to increase his income tax. Instead, Alan chooses to make a $55,000 QCD to Pomona College in exchange for a charitable gift annuity which will pay him $3,710 (7%) per year for the rest of his lifetime. Alan understands that he is allowed to make this election only one time, but he is looking forward to securing a stream of payments for his lifetime while reducing his RMD and making a generous contribution to Pomona College.

What Alan gains:

• Fixed lifetime income of $3,710 per year, guaranteed for life, backed by the full resources of Pomona College
• RMD satisfaction: the $55,000 QCD counts toward his required minimum distribution, reducing his taxable income for the year
• No out-of-pocket cost: the gift is funded entirely from IRA assets he was required to distribute anyway
• A lasting gift to Pomona College that supports future generations of students
• Alan understands this election can only be made once, but the combination of lifetime income, RMD relief and a meaningful contribution to Pomona College makes it an easy decision.

Annuity rates vary with timing and are based on age at the time of the gift. For educational purposes only; not tax advice.

Frequently Asked Questions About IRA Gift Annuities

Can I use my 401(k) or 403(b) to fund a gift annuity? No. The qualified charitable distribution (QCD) provision applies only to traditional IRAs, not to employer-sponsored retirement plans such as 401(k)s or 403(b)s. Some participants roll funds from an employer plan into a traditional IRA first, then make the QCD. Consult your advisor about whether this makes sense for your situation.

Do I receive a charitable tax deduction for an IRA gift annuity? No. Because the QCD is already excluded from your gross income, you cannot also claim a charitable income tax deduction. However, the income exclusion itself is a significant tax benefit, particularly for participants who would otherwise owe tax on a large RMD.

Can the annuity benefit my spouse? Yes. The annuity can be structured to provide payments to the IRA account owner, the owner's spouse or both.

What rate will I receive? IRA gift annuities are funded at standard Pomona Plan annuity rates, which are based on your age at the time of the gift. Use our gift calculator to estimate your rate or call us at 1-800-761-9899 for a personalized illustration.

When do payments begin? Payments must commence within one year of the funding date.

How many times can I use this provision? Once. The IRA charitable gift annuity provision is a one-time option, which is why it typically makes sense to use the full $55,000 allowance.

Does the transfer count toward my RMD? Yes. The QCD satisfies all or part of your required minimum distribution for the year in which the transfer is made.

Let’s Talk About Your Retirement Picture

Ready to explore whether an IRA charitable gift annuity makes sense for your situation? Our Pomona Plan team will walk you through a free, personalized illustration with no obligation.