ErnieG

Grady as Lou S stated the Cash Surrender Value may or may not be the actual Fair Market Value of the contract. The carrier should value the contract's FMV, this will usually be based on the IRS' safe harbor calculations as Lou S outlined in the Rev. Rul.

Assuming the $110,000 is the Fair Market Value. The policy should be properly valued prior to the purchase.

Great replies, the answer is quite simple. Regarding your question and the reference to a distribution at 59 1/2 (per the Plan Document), my assumption is we are referring to a Profit Sharing Plan. The Trustees, have control over the investments in the Plan, life insurance being such an investment. The Plan Trustee, in my experience and to assure they are acting within their fiduciary capacity, would usually offer the participant the right of first refusal, to purchase the policy following PTE 92-6. Should the participants decline the purchase, and the fiduciary documents such, the contracts would be surrendered. As the Plan is the owner, the cash surrender value would be deposited to the Plan, and the pursuant to the terms and conditions of the Plan be either accessible or not to the participants.