I have been out of the retirement plan admin business for a few years and want to run this by the group. Owner has recently retired and wants to terminate his 401(k) Plan. The plan owns a life insurance policy (variable life) where the owner/participant is the insured. He happens to be my brother who was a State Farm Agent.
Can he buy the life insurance for it's fair market value (I realize that may be different than the cash value, but the policies are very mature). The Prohibited Transaction Exemption is still applicable to this, correct? He can take personal cash and pay it into the plan as a purchase of the policy - right. Then he can take his RMD for 2021 (he is over 10 years over his 70 1/2 year and has been taking RMD's every year as required) and then terminate the plan and roll the assets into an IRA. Upon his death, his much, much younger spouse can rollover his IRA into a Spousal IRA and then wait until 2032 (her 70 1/2 year) to start RMD's.
Am I missing anything? Have any rules changed on me?
