Form 5500 - Valuing Insurance Policies

[Guest rkaplan]

When a plan owns life insurance for individuals that has cash value, do you report the cash value as "other assets" on the Form 5500. I was under the assumption that you do but am being told by a plan's agent that you report the value as "$1".

I looked in the 5500 instructions and various other locations and cannot find a definite cite. Help!

Thanks,

Bob

[Guest rkaplan]

Becky,

Thanks for your response

Bob

[BeckyMiller]

ERISA Section 103(b)(3)(A) requires that for ERISA reporting purposes all plan assets be reported at their current value. The Code requires a similar annual valuation.

Some people wish to argue that since such assets are typically segregated to a participant, their current value is not relevant. That has some appeal, but it just isn't the rule. As long as the contract is a plan asset, it is to be reported at the best available estimate of current value.

[lkpittman]

I agree with Becky. In fact, during audit examination, we've had IRS auditors ask specifically for documentation to verify the CSV of any insurance values to support the values reported on the 5500. CSV should be reported as value.

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LKP

[Guest rkaplan]

LKP

Thanks for the reply. You have reinforced my understanding of this topic. Now my job is to convince the insurance agent that the advice he has been giving the client for years is incorrect

Bob