Question re: accounting for a non-government 457(b) plan:
A "Top Hat" plan was set up 15 years ago, using a whole life insurance policy. Premiums over that time were expensed, while the Cash Surrender value was booked as an asset, and adjusted annually, with a matching/offsetting deferred compensation liability also adjusted annually. Premiums paid totaled $75,000 (averaging $5k/year), and when the key employee retired the CSV amounted to $103,000. Proceeds of $103k were received and were immediately disbursed to the retiree. The employer received a Form 1099-R from the insurance company, showing gross distribution to the employer of $103k, of which the "taxable amount" was $28k, and box 5 EE contributions....or insurance premiums were $75k.
So the cost of this arrangement has been recognized annually as premiums were paid and expensed. There has been no gain recognition on the employer's books for the $29k buildup from premium costs to the $103k plan distribution. Should there be? Or is it sufficient to have recognized the $75k in premiums over 15 years, and just footnote the details noted above?
Any guidance would be appreciated.
