Self-funded and Adoption of Advance Payments

[Guest dkl2214]

A group offers a self-funded life benefit and would like to offer advance pay-outs to those with a terminal illness. There are differences in the way the Internal Revenue Code treats self-funded versus insured life insurance policies. I am not sure, however on the following two issues:

1. whether it's possible for a self-funded plan to offer advance payments for those with a terminal illness; and

2. the tax implications of offering an advance payment.

I did look around in our fringe benefits tax guide but was not able to find any helpful information. Anyone have experience with this or able to point me in the right direction? I would appreciate it.