A benefit paid from a vested PRSA following the death of the PRSA holder is taxed as if it were a payment made from a(n):

• A. ARF
• B. Section 785 policy death benefit
• C. employer pension scheme
• D. annuity contract

Answer: (A)

The tax treatment being tested is how death benefits from a vested PRSA are taxed. When a vested PRSA pays a death benefit, the amount is treated for tax purposes as if it were a payment from an Approved Retirement Fund (ARF). That means withdrawals by the beneficiary are taxed as pension income at the beneficiary’s marginal rate, subject to normal PAYE arrangements and tax credits, rather than being taxed as a separate lump-sum death benefit.

This approach aligns PRSA death benefits with ARF payments because both are accessed through ongoing withdrawals from a retirement fund rather than as a one-off lump sum with its own distinct tax rules. The other options describe different product or scheme contexts whose tax treatment doesn’t fit this drawdown-from-a-retirement-fund framework.