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Large nonprofit health systems are being approached frequently by consultants offering proposal to rescind executives 409A/457(f) SERPs in direct exchange for split dollar loan regime arrangement of substantially equal value (but generally a very different "payment" time/form than under the 409A/457(f) SERP). Push for these proposals now seems to be to help nonprofit employer avoid or reduce 4960 excise taxes where these SERP values would exceed $1M at vesting. Anybody seeing these along with the legal opinions from the promoters that these "swaps" "should not" run afoul of 409A or 457(f)?? Thoughts on whether this violates anti-substitution/anti-exchange rules under 409A/457(f) and if not - why? If an executive and employer bilaterally agreed to cancel SERP in exchange for loan regime split dollar arrangement, should executive insist on indemnification from employer for potential 409A/457(f) infractions/penalties if the promoter's "should be ok" doesn't ultimately align with IRS views on audit - or even at Tax Court? I appreciate any insight as to how these proposals are being greeted by employer's counsel.

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?

For a new endorsement split dollar plan, to be effective in 2016 how does one determine if the economic benefit may be valued by the insurance carrier’s one-year term rates? I see that the rates must be (1) generally known to persons who apply for term coverage; and (2) regularly sold by the insurer. The illustrations from the insurance carriers (Pacific Life, John Hancock) all show economic benefit based on their lower term rates, but then in the footnotes say that “we don’t give tax/legal advice etc.” Are plan sponsors using these lower economic benefit amounts? What kind of due diligence can be done?

For a new endorsement split dollar plan, to be effective in 2016 how does one determine if the economic benefit may be valued by the insurance carrier’s one-year term rates? I see that the rates must be (1) generally known to persons who apply for term coverage; and (2) regularly sold by the insurer. The illustrations from the insurance carriers (Pacific Life, John Hancock) all show economic benefit based on their lower term rates, but then in the footnotes state that “we don’t give tax/legal advice etc.” Are plan sponsors using these lower economic benefit amounts? What kind of due diligence can be done?

Is this a split dollar arrangement, taxed under the split dollar regulations? Agreement between employer and employee that employer will procure on behalf of the employee a $1M term life insurance policy and the employer will pay the premiums. Employer has no right to a return of premiums. A term life insurance policy (hence, no cash value component) was procured by the employer, the employer was named as the owner of the policy (with right to designate the beneficiary). The employer looked to the employee, pursuant to the agreement mentioned above, to direct the employer whom to name as the beneficiary of the policy, and the employee directed that it be his wife as beneficiary. While it seems that this should not be a split dollar arrangement because there is no real split of premiums, there is no cash value (term life insurance) . . ., it seems that the split dollar "Compensatory arrangement" rules technically pull this set of facts into the split dollar rules, and I am not seeing a what out of this. The regs. (1.61-22) say this: "(ii) Compensatory arrangements. An arrangement is described in this paragraph (b)(2)(ii) if the following criteria are satisfied— (A) The arrangement is entered into in connection with the performance of services and is not part of a group-term life insurance plan described in section 79; (B) The employer or service recipient pays, directly or indirectly, all or any portion of the premiums; and © Either— (1) The beneficiary of all or any portion of the death benefit is designated by the employee or service provider or is any person whom the employee or service provider would reasonably be expected to designate as the beneficiary; or . . ." Any thoughts would be greatly appreciated.