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Plan merger and life insurance


R. Butler

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Co. A purchases Co. B mid-year. Both Co. A & Co. B have retirement plans. Co. B's plan is being merged into Co. A's plan at 01/01/15.

Just found out that Co. B has life insurance in the plan. Co. A doesn't offer life insurance and really doesn't want to fool with the policies. Can the Co. B participants who have policies be forced to surrender the policies into the plan?

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Based on my understanding of how these things operate, the Company B participants should not have any control over the life insurance policies, which belong entirely to the plan, so they cannot be forced "to surrender the policies". Perhaps they should be given an opportunity to buy the policies from the plan for their full current cash value (and either have them go paid up or take over the premium payments), and if they choose not to, the policies could be surrendered by the plan for the cash value. Buying the policies from the plan should not give the participants any special rights under the ongoing plan. This assumes that the participants were never required to contribute to either the plan or the insurance premiums.

Always check with your actuary first!

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