Tina W

Agreed, I submitted a question to TAG and they agree that they have DIAs and full disclosure is needed. Luckily, the client is going to move to a different investment and allocated contracts. Thanks for the reply

What I am referring to is that each participant does not have their name on an account. There are 6 accounts under the plan. One for each plan investment. The gain is allocated to the participant at the end of the quarter. (example, mid-cap has 10,000 in earnings which is allocated prorata by participants account balance in that fund)

I have a 401k with pooled assets with 6 investment options which are included on their enrollment forms (such as international, mid cap, small cap, fixed & money market) An account with Morgan Stanley is set-up for each investment and the broker or money manager buys and sells stocks and bonds in each account according to the type of investment. The Money Market is strictly in a MS money market. The brokers is unable to provide comparative chart. Would this type of investment be considered a brokerage window? There is another plan with the same broker that has this same type of arrangement but some of the funds have stocks and mutual funds. Does the fact that they have some mutual funds change anything?

Here is the response I received from the TAG website. The limit for term life insurance policies is (less than) 25% of the contribution. This is because term life insurance has no cash value; it is strictly death benefit protection. All other limits applicable to life insurance in qualified plans is derived from this basic 25% limit. I'm not aware that IRS has specifically ruled on universal life insurance. However, since the 25% limit applies to the incidental benefit (the pure life insurance), the amount of a premium that goes towards a plan investment (of any type) is not included in the 25% incidental benefit limit, because a plan investment is not an incidental benefit. This is why the limit applicable to whole life insurance premiums is (less than) 50%. IRS deems half of a whole life insurance policy premium to go towards the cash value of the policy. The other half of the premium is an investment of the plan, and therefore is not included in determining the incidental benefit limit; it is not an incidental benefit.

When calculating the Incidental Limit on Universal Life Insuarance for a Money Purchase Plan, do you use the full amount of the premium paid or only the cost of the actual insurance? I have been calculating the limit on the full premium for my plans. I recently recieved a Money Purchase plan that lowered their contribution amount and now the premiums exceeded the 25%. I submitted a question to a technical answer group and they are stating that the Incidental Limit should be calculated on the cost of the insurance and we should not include the portion of the premium that goes toward the investmnet component of the policy.