Employer (not the plan) pays the life insurance premiums

[jkharvey]

If the employer is paying the insurance premiums for life insurance policies held in the plan, what are the issues or possible issues involved? I've been trying to figure out if this was permissible and I don't find anything that specifically says it can't be done.

[pmacduff]

it was awhile back, but I had this same issue because the client did not have a profit share contribution for a year or two. The problem becomes an "employer" allocation to those with insurance, but no allocation to others. Also - because the premium amounts differ you don't have standard allocation amounts to each person.

Our client began paying the premiums out of the individual participant accounts. That way, if there is no profit share, you have no discrimination issue. It's simply an investment type that some participants have in their account.

I suppose if everyone in the plan has a policy, it might work but again have found that the Employer paying the premium is really a plan contribution and is not uniform by person.

[david rigby]

Might the PS document already address this issue?

[Belgarath]

Sounds rather odd. It should be considered as an employer contribution to the plan, and will therefore be allocated according to the plan language for allocating employer contributions.

As Mr. Rigby has already suggested, the plan will have language for allocating an employer contribution. You may not like the results, however.

[Bird]

They are treated as employer contributions, and someone just has to make sure that the employer contributions are allocated according to the terms of the document, which probably means that in all likelihood additional contributions are required to even things out. Yes, it's better to take the money from the participant's accounts. Better yet to not have the insurance in the plan.