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Corporate accounting must be lax to non-existent for this to occur for several years. The paying agent approach might be the best way to resolve it, or treating as contributions to the plan. Each has its pros and cons and implications for the corporate tax returns as well as correcting the plan. At a minimum, any correction that involves plan money going to the corp should involve ERISA counsel.

I'd think so, at least effectively. Probably something else but as above, they are effectively contributions. This should be fixed by returning money to the corp, whether or not with IRS approval. Amusing that they don't want to be reimbursed. How does one wipe out the obligations without showing a distribution?! Fascinating what some people can do to screw things up; I mean you really do have to try very hard to do something so very wrong.

Amend the plan to cease permitting the purchase of life insurance. That rule will then apply to everyone. Patricia Neal Jensen

I have had CPAs try that in the past, but it is plan comp. I always give them the EOB explanation and they back off. EOB current online edition CHAPTER 1A: IMPORTANT DEFINITIONS -PART I - Compensation - Part A - Item 1.g.