Governmental 457(b) Plan and Life Insurance Policies

[Guest IPSTim]

As I understand the regulations Life Insurance policies in a Governmental 457(b) Plan should be owned by the trust with the trust as the beneficiary and PS 58 income applied for DB over $50K. I have a client who has Life Insurance policies owned by the participants in thier plan.

What are the issues here and logical correction methods? On a broader note how did the plan provider allow these policies to be set up this way?

[QDROphile]

The provider was an idiot who got snookered by an insurance sales person. Probably violated state or local law in the process. Life insurance has no place in a governmental 457(b) plan. I am not saying that life insurance is not permitted under tax law.