Guest psgross Posted June 28, 2005 Posted June 28, 2005 My knowledge regarding insurance policies in plans is somewhat limited and I need some guidance regarding the following question: Can a participant buy out the policy from the plan....for example, write a check payable to the plan for the cash value of the policy today and take the policy out of the plan in his own name. Then allow for a rollover of the account baloane into an IRA at a later date? Isn't this a prohibitive transaction?
bzorc Posted June 28, 2005 Posted June 28, 2005 I believe that an individual participant may "buy out" the insurance policy from the plan by paying in the CSV. I have done it before, but not since the mid 90-s. I'm not sure if there has been any regulations since then stopping this.
Belgarath Posted June 28, 2005 Posted June 28, 2005 Generally allowable. See PTE 92-6, the requirements of which must be satisfied. Also, for IRS purposes, be aware that you need to look at Fair Market Value (FMV) if this is greater than the cash surrender value.
Belgarath Posted June 28, 2005 Posted June 28, 2005 Prohibited Transaction Exemption. P.S. Here's a link to the PTE. http://www.dol.gov/ebsa/regs/fedreg/notices/2002022376.htm
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