Move existing Whole Life into new DB Plan

[CTipper]

Greetings

Is there a legal mechanism to move an existing Whole Life policy from individual ownership into a new Defined Benefit plan?

It's more of an insurability issue than trying to do something fancy.

I would presume that the Plan buys the Policy from the Employee and that there are tax consequences of some sort for the selling Employee.

Any body know the answer off the top of my head or know where to send me for guidance?

Thanks

Christopher

[tymesup]

Discrimination, PS 58 costs and the size of the policy are possible issues.

[CTipper]

The size of the policy would be within the allowed limits.

Everyone else would have a face value that was also appropriate, per the plan document.

So, if the face amount is within limits and everybody in the Plan has the proscribed face amount, we shouldn't have an issue with face amount or discrimination, right?

Christopher

[tymesup]

The policies should also have similar features. For example, whole life for the owner and term life for the employees could be a problem.

[CTipper]

The policies should also have similar features. For example, whole life for the owner and term life for the employees could be a problem.

Except that within a DB plan they all have to be Whole Life.

Okay, someone forwarded it to me outside of this Forum.

It is a Prohibited Transaction.

But, there's an exemption to it.

These are handled in DOL PTEs 92-5 and 77-7

Bottom line -- yes, you can. The plan can buy the policy from an individual.

I can't find PDFs of these to do as attachments. Maybe someone else has them.

Christopher

[tymesup]

"Except that within a DB plan they all have to be Whole Life."

I believe they can be universal life or term life, as well.