Treatment of Life Insurance Premiums Under PPA

[Guest s.c.semler]

Plan with a BOY valuation date. Company paid premiums for insurance held in the plan which are, therefore, treated as plan contributions.

A few questions:

1. Are the premiums discounted to the valuation date just as other contributions are?

2. If late quarterly installments apply, would the premium be used to satisfy the installment(s)?

If so, is there a requirement that the premium amount paid be used toward the installment if it was paid earlier than the "regular" plan contribution?

Thanks!

[FAPInJax]

Let's start with the basic premise (usually not followed) that the client should make the contribution to the trust and then pay the insurance premiums from the trust. This methodology answers all your questions as they are physically 'employer contributions'.

Now, making premium payments directly should be treated exactly as above and therefore all the rules still apply.

[Guest naveen]

Unrelated question. Exactly what premium amounts are deductible in a defined benefit plan that purchases insurance for all participants (100 X proj mthly benefit)

[FAPInJax]

The premium has no bearing on the deduction under PPA. The valuation will presumably value a pre-retirement death benefit (which is a complex calculation after the final regulations) and this cost will be part of the minimum required contribution. This extra cost is usually substantially less the premium paid.