Guest Benefitsrock Posted May 2, 2007 Share Posted May 2, 2007 We want to provide our employees with a death benefit that is similar to life insurance such that when an employee dies, his/her beneficiary/estate will receive a nominal amount. We are not purchasing a policy to insure the death benefit but rather are paying any benefit ourselves. Is the benefit taxable, and if yes, can we structure it so it isn't taxable to the beneficiary (we don't want to purchase a group life insurance policy however.) Thanks in advance for any responses. Link to comment Share on other sites More sharing options...
jpod Posted May 2, 2007 Share Posted May 2, 2007 it will be taxable; no way around that Link to comment Share on other sites More sharing options...
Guest Guest_Don Levit_* Posted May 3, 2007 Share Posted May 3, 2007 ipod: What about paying these benefits through a self-funded VEBA? Don Levit Link to comment Share on other sites More sharing options...
jpod Posted May 3, 2007 Share Posted May 3, 2007 Don Levit: What Section of the IRC says that death benefit money paid by a VEBA is tax-free? Link to comment Share on other sites More sharing options...
Don Levit Posted May 3, 2007 Share Posted May 3, 2007 ipod: Section 101(a). Also see Private Letter Ruling 199921036. Don Levit Link to comment Share on other sites More sharing options...
jpod Posted May 3, 2007 Share Posted May 3, 2007 Don Levit: Very interesting. I thought you were emphasizing the "VEBA" aspect of the equation. I never realized IRS had interpreted "life insurance contract" so broadly. Seems like a long road to travel simply to save taxes on a "nominal amount," but if the cost ends up being less than the cost of buying insurance I guess it can be a good idea. Link to comment Share on other sites More sharing options...
Guest EXB 1 Posted June 7, 2007 Share Posted June 7, 2007 If cash flow is not a concern, you could gross up the benefit payment to the beneficiary. This would be much simpler than setting up a VEBA. Link to comment Share on other sites More sharing options...
Guest execbenerbc Posted June 14, 2007 Share Posted June 14, 2007 Don't forget about accruing for the benefit in a DBO plan - not required when you purchase life insurance unless you promise benefits post-retirement. Link to comment Share on other sites More sharing options...
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