GVUL - Plan Termination

[Guest aw]

Is anyone familiar with the rules surrounding the termination of a GVUL plan?

If the employer decides to discontinue the plan, are there any negative consequences to the participants?

[KIP KRAUS]

I give up. What is a GVUL Plan?

[GBurns]

Group Variable Universal Life.

[Ron Snyder]

Presumably the GVUL contract is owned by the employer, since the plans are generally used for executive compensation. If so, any cash value would revert to the employer, who never wrote off the premiums in the first place. There are no adverse tax impacts on the participants, but there is one "negative consequence": the employee has lost a benefit he previously had.

[GBurns]

If I remember correctly, most of the GUL and GVUL that I saw were for NQSERPs funded as split dollar plans and for which tax deductions were taken.

I do not remember them being totally owned by the employer because there were colaterral assignments and/or Rabbi Trusts etc etc. There were a lot of so-called "Advance Market" techniques being used to make the concepts seem sophisticated and complex apparently not only to cloud the legitimacy issues but also to justify the use of high commission products.

I am wondering whether there would be some sort of residual tax consequence, to both the employer and employee, caused by a disallowance of the tax deductions taken, whether the plan is terminated or not.

If the policies were totally employer owned, what was the benefit to the employee? If the benefit was only a promise to pay the death benefit to the employee's benificiary then there most likely a taxable benefit being received and a tax deduction being taken by the employer.

If the policies were only partially owned by the employer, then the other part was owned by the employee. Again a taxable benefit with deductions taken.

In both cases there is most likely a disallowance problem whether or not the policies are now terminated.

If