Life Insurance rolled into a 401(k) Plan

[britoski]

I'm a complete novice at life insurance as an investment in a 401(k), so I need help with the basics. Plan has old life insurance investments from plans that were merged into the plan years ago. The participant has died and no distributions have been taken from the account. No one seems to have a copy of the policy.

As I am digging into getting a copy of the insurance policy, could anyone fill me in on the basics of how this would generally work at this point? Who fills out the claim form? What happens to the proceeds if the beneficiary has not requested a distribution from the plan?

Everything I've found on this gets into the details, but skips these basics- any help you can provide would be much appreciated!

[Bird]

The way it is should work is...the plan is the owner and beneficiary of the policy, and the proceeds are paid to the plan. The proceeds become part of the amount payable to the plan beneficiary, who completes the forms to request a distribution. Part of the proceeds are tax-free (the "at-risk" portion, which is the difference between the cash value and the face value), plus, if PS-58 costs were properly reported, the cumulative PS-58s are recoverable tax-free.

It wouldn't be unusual for lots of things to be messed up, like the ownership and/or beneficiary. An agent sold the policy and should be helping with the payout (bwa-ha-ha).

[britoski]

The way it is should work is...the plan is the owner and beneficiary of the policy, and the proceeds are paid to the plan. The proceeds become part of the amount payable to the plan beneficiary, who completes the forms to request a distribution. Part of the proceeds are tax-free (the "at-risk" portion, which is the difference between the cash value and the face value), plus, if PS-58 costs were properly reported, the cumulative PS-58s are recoverable tax-free.

It wouldn't be unusual for lots of things to be messed up, like the ownership and/or beneficiary. An agent sold the policy and should be helping with the payout (bwa-ha-ha).

Thanks Bird- this is helpful

[mbozek]

I'm a complete novice at life insurance as an investment in a 401(k), so I need help with the basics. Plan has old life insurance investments from plans that were merged into the plan years ago. The participant has died and no distributions have been taken from the account. No one seems to have a copy of the policy.

As I am digging into getting a copy of the insurance policy, could anyone fill me in on the basics of how this would generally work at this point? Who fills out the claim form? What happens to the proceeds if the beneficiary has not requested a distribution from the plan?

Everything I've found on this gets into the details, but skips these basics- any help you can provide would be much appreciated!

You need to determine who is the designated beneficiary under the LI policy who can file claim for benefits. In some plans the participant could designate the beneficiary. There are plans that allow the participant to name a trust as beneficiary in an attempt to avoid estate tax on the LI policy.

[Guest patcassidy]

Get a copy of the insurance policy – that should be easy to do. Get in touch with the beneficiary and inform him about the life insurance policy. He/She should file the claim.

As an aside, for life insurance on your own self, don't always rely on group coverage through work. It can be lost at any time if you quit or get fired.

Pat Cassidy

Disclaimer: I work for AccuQuote and this is my personal opinion.