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Found 13 results

  1. What are the conditions that trigger the requirement to surrender or distribute an individual life insurance policy held on behalf of a participant from a qualified plan after a participant terminates? How does terminating before or after NRA impact whether a life insurance policy held in a participant’s account needs to be surrendered or distributed? Our ASC BPD Section 10.08(d) says, “Life insurance policies under the Plan, which are held on behalf of a Participant, must be distributed to the Participant or converted to cash upon the later of the Participant’s Annuity Starting Date (as defined in Section 1.12) or termination of employment.” And then Section 1.12 says in part, “Annuity Starting Date. The date an Employee commences distribution from the Plan.” Do partial lumps, installments or RMDs trigger this requirement? I’m also looking at the ERISA Outline Book which says, “Life insurance can't continue beyond retirement. Rev. Rul. 54-51 includes a requirement that for life insurance to be incidental, the policy must be converted to retirement income or distributed to the participant no later than the normal retirement date under the plan. Rev. Rul. 57-213 clarifies that the life insurance policy may be continued beyond retirement age, if the participant does not elect to retire. The IRS’ Listing of Required Modifications published for prototype plans provides that conversion or distribution of the policy is not required until the “annuity starting date” (i.e., the date distributions commence). Although not addressed by the IRS, it should be reasonable to allow insurance coverage to continue beyond the required beginning date under IRC §401(a)(9), if the participant has not terminated employment.” Any guidance on this would be appreciated.
  2. Group: PC and wife (66/70 yrs) has $20mm in IRA's. Already used lifetime gifting on other highly appreciated assets with a FLP many years ago. I'm told these assets are outside of his FLP. He has said one strategy he's looking at has the following steps: 1. Set up qualified Def Contribution (DC) plan. 2. Rollover $20mm tax-free from IRA into DC. 3. Use funds to purchase High Cash Value insurance at $2.5mm per year premium for 4 years. Per spouse. 4. After yr 4, sell insurance policies to his FLP. 5. PC is relying on DOL PTE 92-6. My reading of advisory opinion is the DOL essentially allows sale of insurance policy out of insured's qualified plan. 6. PTE 92-6 seems to say that the fair market value to purchase the insurance policy is its cash surrender value. Which is far less than the tax if PC were to distribute all IRA funds. I'm beginning to review for pitfalls/risks and asking the collective wisdom of the group if they have researched this transaction. Q: My initial thought is that a traditional defined contribution plan has a limit of 51% insurance and max of 49% annuities. Is this correct? Therefore, in the above facts, it's doubtful a majority of funds can be used to purchase life insurance. Q: I recall the issue the IRS had with welfare plans in 2000's was the springing cash value in future years? Even if purchase the insurance policy after yr 4 this transaction seems to have similar issues. Or at least the potential issue for the govt to raise in tax court. I believe IRC 269 is the govt catchall fraud argument for any abusive transaction. Thoughts and comments appreciated.
  3. My mom had a Pension. A QJSA. She divorced in 2006 and retired in 2011. In her divorce they each retained their own retirement acts. Free and clear from any claims of one another. Through her employer I was her beneficiary on her life ,ad&d, 401k while she was working. She has passed and the company said the beneficiary had been notified without another word spoken to me. Her attorney said that state law (Ohio) predeceases the ex in retirement plans with decree which she thought all would go to me (pension and other acts) I am her only child. Now, her employer said I was not the beneficiary although I showed them paperwork that I was, which was done at her retirement in 2011. EVEN THOUGH THEY NOW SAY, after 5 months of back and forth, that I’m not the beneficiary they want me to send in her death certificate? It does not make any sense. Not only am I dealing with the death of my best friend but her employer is making me feel like crap to be honest. It’s all so very sad and don’t know what to do at this point. Do I just give up? Do I let it go? My mom did not want him to have anything because he had his own and it was always her intentions for me to have her acts. I was also her power of attorney and we had bank acts together. I have taken a full notebook of notes with the conversations I have had with her benefits center and Human Resources. Any insight would be appreciated. Thank you so much! Quinan
  4. I have a client (under age 59.5) that wants to buy life insurance with his 401k/Profit Sharing account. He has been a participant for 15 years so I don't think there is any issue with "seasoned money" since the plan document also states that after 5 years this is a non issue. Could I be missing something? Can he use any source to buy life insurance or does it have to be employer sourced since he is under age 59.5?
  5. Not sure which message board to post this. Client is purchasing life insurance [contractual protection insurance?] from a Lloyds specialty broker to provide coverage to key executives above what is available in group plan. Client will be owner and pay premiums, but executive will be able to name beneficiary. Can the client impute income to executives based on Table I rates, and then the benefits paid would be received tax free? Or does the full premium amount need to be included as taxable income like a 162 bonus plan? Or will death proceeds be taxable to estate, or as income in respect of a decedent, or taxable to the beneficiary?
  6. A client has insurance in a defined benefit plan which names the sponsor as beneficiary. One of the insureds died and the benefits were paid to the sponsor consistent with the beneficiary designation. Intuitively, I believe that having a beneficiary other than the plan, itself, represents, at minimum, a prohibited transaction. I have been unable to find any citations or guidance to support this. Does anyone have any insight here?
  7. How difficult is it to add another benefit to an existing VEBA. We have an existing VEBA and management asked us to evaluate adding the existing retiree life plan. The company pays most of the retiree life premiums, but retirees contribute a portion. What are the key considerations? Upfront and ongoing legal and accounting costs? Our current annual retiree life premium is relatively small (about $600,000 per year including retiree contributions) so one of my concerns is that the initial cost to move the plan into the VEBA and the ongoing legal, accounting and investment expense could be significant in comparison.
  8. Hi all, CPA here working on a Form 5500 audit (new account for us). The Plan is a defined contribution profit sharing plan that owns four life insurance policies with a total cash surrender value that comprises ~40% of plan assets. Are these contracts required to be reported on Form 5500 at cash value? I am being told by the Plan's third party administrator that they have never been reported as Plan assets because Form 5500 Schedule H Part I it states: "Do not enter the value of that portion of an insurance contract which guarantees, during this plan year, to pay a specific dollar benefit at a future date.". I am hoping to get some insight and/or pointed to some guidance as I am not too familiar with qualified plans that offer life insurance. I have had a few in the past where the value has been reported but the value was not significant to the plan, so it was never a sticking point with respect to our report. Any help would be greatly appreciated!
  9. I have a plan that has held a life insurance policy for only 4 participants for many years. They would like to terminate the polices, just get rid of them and take whatever the value is to themselves (they want the cash). Our record-keeper is telling us that in order to cancel the policy they HAVE to deposit the funds into the plan and then follow the plan document as far as being able to actually take the funds themselves. In this case, you have to either terminate employment or be 59 1/2 take a distribution, per their plan doc. However, we were told by the outside insurance agent that they could take the cash and be taxed on it, as normal. I just need guidance on how to get a life insurance policy out of a plan - when the participant is under 59 1/2 and still employed?? It is possible, right?? TIA!
  10. Would there ever be a period of time where there is a loss of life insurance coverage during a 1035 exchange?
  11. What are the implications of exceeding the incidental limits for life insurance in a Profit Sharing Plan? Are there corrective mechanisms, penalties, excise tax, govenernment forms to report the excess?
  12. Hello, I have a client who added life insurance to the Plan and purchased a couple of whole life policies in late December of 2013. While the premiums are substantial, the only portion of them which had cash value at year end are the Paid Up Additions. The cost of insurance was almost as high as the value of the PUAs, and I'm not sure where and how to account for this on my balance sheet and 5500. My prior experience has been with older policies where the premium simply adds to the overall cash value. I was thinking of accounting for the COI as an expense, like other expenses, but an alternative is to call the COI a withdrawal from the plan, since it's not the same as a normal plan expense. Call it withdrawal? Expense? Something else? Thanks for your help!!
  13. What impact, if any will this decision have on employer sponsored life insurance plans that offer employee spouses life insurance on a voluntary basis?
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