New (old?) Planning concept

[bzorc]

With the new EGTRRA rules, a person can now roll over IRA balances into qualified plans. I have heard from a client who wishes to do the following:

1. Set up a new profit sharing plan

2. Roll over into the plan a substantial IRA account balance

3. Take that balance and purchase life insurance with it (within plan limits, i.e., 50%). The insurance will have a low CSV until year 5 (springing Cash value policy), and then increase.

Ignoring the "recurring and substantial" contribution requirement for profit sharing plans, is this something that anybody has run across, and if you have, do you think it would fly? Any answers appreciated. Thanks.