Insurance in 401k

[Guest gwelsmore]

Is anyone familiar with the rules regarding purchasing a life insurance contract in a 401k or Individual 401k?

Specifically, I'm looking for what the maximum premium amount can be. i.e. 50% of account value, or maximum dollar amount.

I would also like to find any source information from the IRS, but have been unable to.

Thank you.

[ETA Consulting LLC]

Your best reference would be the actual document (perhaps the Basic Plan Document) for the plan. It must actually be written to allow Life Insurance, and would incorporate all the incidental limits. Typically, the amounts are limited to a certain percentage of "aggregate contributions" since the plan was established. For instance, if my cumulative contributions over the past 10 years to the plan were $100K, then I could purchase a whole life policy while having $49,999 available for premiums without exceeding the incidental limit. Then, you'd get into seasoned and seeded money. We can write books on the possibilities, but your best source would be the actual document to the plan.

You'd want to ensure you have a good TPA to accurately recordkeep the plan with the insurance.

Good Luck!