401(k) and life insurance

[Guest PensionDesign]

i just spoke with john hancock and they informed me it is possible to pay your life insurance premiums with your 401(k). however, they did not know the rules, the limits (% of your 401(k) bucket...) or anything in general regarding the regulations behind this. i figure that in order for you to be able to do this, there have to be some sort of rules. anyone know them? anyone know where i can find them?

also, how would i go about finding out whether or not you can pay other bills with your 401(k) money.

[Guest PensionDesign]

i just spoke with john hancock and they informed me it is possible to pay your life insurance premiums with your 401(k). however, they did not know the rules, the limits (% of your 401(k) bucket...) or anything in general regarding the regulations behind this. i figure that in order for you to be able to do this, there have to be some sort of rules. anyone know them? anyone know where i can find them?

also, how would i go about finding out whether or not you can pay other bills with your 401(k) money.

basically i need to know where i can find the rules for life insurance in your 401(k) plan.

[WDIK]

i figure that in order for you to be able to do this, there have to be some sort of rules. anyone know them?

First, your plan has to allow the purchase of insurance. Second, if allowed, the insurance must be considered "incidental" to the plan's retirement benefits. Generally speaking insurance premiums are incidental if they are less than 50% of company contributions if applied to a whole life policy or less than 25% if term insurance is purchased.

also, how would i go about finding out whether or not you can pay other bills with your 401(k) money.

You cannot generally use your retiremnet fund in this manner. However, if the plan allows loans, you may be able to take a loan to pay other bills. Hardship distributions or in-service distributions, if available, may give you some access to your benefits, but there are also tax consequences.

I would recommend you review the Summary Plan Description of your 401(k) plan and consult with your accountant before making any specific decision.

[Guest PensionDesign]

i figure that in order for you to be able to do this, there have to be some sort of rules. anyone know them?

First, your plan has to allow the purchase of insurance. Second, if allowed, the insurance must be considered "incidental" to the plan's retirement benefits. Generally speaking insurance are beneficial if they are less than 50% of company contributions if applied to a whole life policy or less than 25% if term insurance is purchased.

also, how would i go about finding out whether or not you can pay other bills with your 401(k) money.

You cannot generally use your retiremnet fund in this manner. However, if the plan allows loans, you may be able to take a loan to pay other bills. Hardship distributions or in-service distributions, if available, may give you some access to your benefits, but there are also tax consequences.

I would recommend you review the Summary Plan Description of your 401(k) plan and consult with your accountant before making any specific decision.

well the plan does have life insurance and the employer would like to pay his life insurance premium with his 401(k) money. so, i need to know what the rules are in order to do this.

john hancock said that he could do it, but they weren't sure of what kind of limitations there were.

[Belgarath]

What is your relationship to this plan? Are you a participant? If so, you should be asking this of the Trustee/Plan Administrator. Are you the employer? If so, you should be asking your TPA. If you are an insurance agent, you'd want to check with the Trustee/Plan Administrator (who will likely refer the question to the TPA). Friend, advisor, accountant, etc.? - check with the Trustee/Plan Administrator.

"How do I do it" is not a question that can be (or should be) specifically answered for you on these boards, because the answer is very plan-specific. As previous posts already indicate, yes, a plan can allow life insurance, and yes, there are rules. Lots of them! But to apply them to a specific plan situation requires the answer to be given by someone familiar with the specific provisions of the specific plan in question.