Jump to content
Sign in to follow this  
EGB

Is this scenario split dollar?

Recommended Posts

Is this a split dollar arrangement, taxed under the split dollar regulations?

Agreement between employer and employee that employer will procure on behalf of the employee a $1M term life insurance policy and the employer will pay the premiums. Employer has no right to a return of premiums.

A term life insurance policy (hence, no cash value component) was procured by the employer, the employer was named as the owner of the policy (with right to designate the beneficiary). The employer looked to the employee, pursuant to the agreement mentioned above, to direct the employer whom to name as the beneficiary of the policy, and the employee directed that it be his wife as beneficiary.

While it seems that this should not be a split dollar arrangement because there is no real split of premiums, there is no cash value (term life insurance) . . ., it seems that the split dollar "Compensatory arrangement" rules technically pull this set of facts into the split dollar rules, and I am not seeing a what out of this.

The regs. (1.61-22) say this:

"(ii) Compensatory arrangements. An arrangement is described in this paragraph (b)(2)(ii) if the following criteria are satisfied—

(A) The arrangement is entered into in connection with the performance of services and is not part of a group-term life insurance plan described in section 79;

(B) The employer or service recipient pays, directly or indirectly, all or any portion of the premiums; and

© Either—

(1) The beneficiary of all or any portion of the death benefit is designated by the employee or service provider or is any person whom the employee or service provider would reasonably be expected to designate as the beneficiary; or . . ."

Any thoughts would be greatly appreciated.

Share this post


Link to post
Share on other sites

Yes - Endorsement Method Split Dollar.

Employer owned policy. Employer is endorsing a percent of the death benefit, in this case 100%, to the employee to designate the beneficiary. Employee is receiving an Economic Benefit and should be charged an imputed income accordingly.

  • Like 1

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×
×
  • Create New...