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Death Benefit Only Plan,

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  • 3 months later...

The flavor of the original post suggested that there was no insurance involved, or at least no insurance giving the employee the right to name the beneficiary, so there would be no PS 58.

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  • 2 weeks later...

Since there is no insurance, there are no PS-58 costs. If there were insurance, it would be Table I, not PS-58 that governed imputation of taxable income.

By self-insuring the employer gets no deduction for funds set aside to provide such a benefit until the death of the participant. Then upon a participant's death the employer gets a deduction and the beneficiary pays income tax on the distribution, which is ordinary income.

If group-term life insurance were used, the employer would receive an immediate tax deduction for premiums paid, the employee would not have imputed income on the first $50,000 of benefit and the death benefit would be received tax-free by the beneficiary.

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