Profit Sharing Plan Incidental Benefit Exception

[jkharvey]

Am I correct in understanding that if a participant has accumulated PS contributions that are more than 2 years old the 25% limitation for life insurance premiums does not apply? If this is correct, are the excess premium payments considered taxable distributions to the participants? The blue "Pension Answer Book" implies this may be the case.

[R. Butler]

You are correct that the incidental benefit limit does not apply to premiums that are paid solely with contributions that are "aged". Its debatable whether the premium would be taxable. The IRS informally said it would be in the 2000 ASPA Q&A session.

http://www.aspa.org/ASPAsearch.htm

Use this link to find the 2000 Q&A. It is question number 32.