Taxability of Life Insurance Proceeds

[Medusa]

A participant in our client's (we are a TPA) DC plan recently died and had a directed life insurance policy. It appears that in the past, the PS-58 costs have been reported sporadically at best by prior TPAs, and perhaps not reported at all by the participant.

Does this affect the taxability of the insurance proceeds to the surviving spouse? Should PS-58 costs be recovered, to any extent? I'm not sure how far our responsibility as the TPA extends in this matter - except of course we have to prepare the tax reporting forms.

Med