Life Insurance after attaining NRA

[Guest MrT]

I did some searching and have some confusion. I really have two questions.

I have a participant that has just attained the NRA. He is also the owner of a business and that sponsors a PS/401k Plan. The owner/participant wants to rollover a very large amount from a 403b plan and use this money to pay premiums in a life policy. The Owner/Participant no longer works for the Univesity and can take distribution of the 403b account. I am the TPA and not the broker.

Can the participant have a policy and pay premiums from the plan after attaining NRA? Does this rule exist for DC Plans?

If the participant can have the policy, can the premiums be paid from the rollover account? I know there is a rule about using the two year old money, but I did not see anything about using rollover accounts.

I would appreciate any help here.

Thanks

[Ron Snyder]

I believe that you posted this in the wrong forum. Put this in Gary Lesser's forum for better responses, since he's the rollover expert.

The limitations on insurance premiums apply to contributions by the employer. So the real question is, does the 403(b) money change character by being rolled over? If it becomes PS/401(k) money, it certainly could be used to buy insurance. If it is still 403(b) money, it is limited to tax-sheltered annuities or mutual funds under 403(b)(7). I believe that it is 403(b) money after rollover, but you should get others opinions about this.