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I just hand calculate everything. Keep records on college ruled paper.

I suggest making each employee come to a location and get a physical copy of the SPD. I would also have postcards printed up and affixed with some sort of hologram (so you know the cards are authentic) with the employees name, SSN and other employer related data (division, pay grade, location, EE-id, whatever). When the SPD is handed off, the employee must show government issued photo identification (driver's license, passport, etc.) and a secondary piece of id. Also, as proof of receipt the employee must sign the postcard and give two thumb prints--one right, one left. Get the cards notarized, too. Having the whole process under video surveillance is an additional safeguard. Make several copies, and store them on a variety of media (flash drives, dvd's, digital video tape, on the company's HR servers and any backup servers, copies to attorneys, too.)

I'd say "A", but for a different reason. There really isn't a legal requirement to report this each year. This income is imputed to the participant each year in order to ensure the pure death benefit (calculated as the face amount of the policy less the cash value; aka net amount at risk) gets paid from the plan income tax free. The reference for this is Section 72(m)(3) of IRC. So, I wouldn't have this imputed income as there would be no death benefit needing to be paid from the plan income tax free in the invent the insured dies. Good Luck!