Group Annuity Contract Ancillary Life Insurance?

[KateSmithPA]

Several members of our firm recently attended a SunGard Corbel 5500 Workshop. We all have notes on one case study with regard to a 401(k) plan that provides ancillary life insurance. In this case, we were told to check Box 8b on the 5500 and put in code 4B.

Many of the plans we prepare 5500s for are invested in Group Annuity Contracts through a major insurance company. The plans do not allow for life insurance as an investment option. We have always included "Insurance" as a funding arrangement and have completed Schedule A. But, we have not checked Box 8b to call the plan a welfare benefit plan.

Our manager has now directed us to check Box 8b - indicating a welfare benefit plan and Code 4B for Life Insurance.

Is this correct?

Also, we cannot locate our email contact information for sending this question to Corbel. If anyone has that, we would sure appreciate having it.

Thanks.

[Guest b2kates]

Could the case study have been misconstrued? It is my understanding that the IRS does not permit "combined" welfare and pension plans. A plan is one or the other.

It would appear to me that marking both 8a as a pension plan and 8b as a welfare plan is a red flag and consistency error.

[Tom Poje]

if you look at the example in the 5500 instructions (assuming things haven't changed sinced 2002) it is example 3 and you check both items pension benefits and welfare benefits. so marking 8a and 8b is the correct way to do this.

(I would be willing to bet most people aren't aware of this)

In fact, the example is worded almost the same as you describe

e.g 401k with ancillary life insurance.

(oh no, I see its the wonderful Kate Smith, who 'sings God Bless America', does pensions, was an MD and is now a PA. Wow!)

[Belgarath]

I agree with Tom - this is how we've done it.

If you did it wrong, I doubt that anyone will go to jail for it! I've never quite figured out the point of it myself when you are already filing a schedule A - I don't know if it is just for some statistical database stuff they do?

[Guest b2kates]

I am humbled and stand corrected. Example 3 state that where there is ancillary life insurance both boxes 8a and 8b are checked.

[KateSmithPA]

Thanks to all for your answers. Tom, I have considered changing from PA to VA since I now reside in Virginia. Always make it a point to attend your sessions at the ASPA annual meeting.

One last question on the topic. Can anyone define ancillary life insurance for me? Do variable annuities meet this definitions.

Again, thanks.