life insurance proceeds

[Gary]

Say the face amount of a life policy is 100k and the CSV is 20k

At death say 100k goes to plan and trustee pays 80k to beneficiary and 20k CSV remains in plan.

does this mean that PS 58 costs do not apply since plan retains some of the proceeds? per 1.72-16(b)(6)?

thanks

[Gary]

additionally,

a plan defines death ben as life proceeds less CSV plus pvab.

hmmm.

the above does not seem to meet incidental death ben for sure; i.e. if pvab is greater than what the "auxilliary fund" would compute to be, it seems in excess of incidental death ben.

thoughts?

[SoCalActuary]

Because the PS58 costs have been charged to the participant, their $80,000 net amount at risk is tax free.

The PVAB is taxable income. There is no recovery of basis for past PS58 costs.

The death benefit would be incidental if it met either of the two defined formulas, 100 times pension, or premium was below the 74-307 rate.

Why do you think it fails? Sounds exactly like it was intended to be.

[Gary]

i'm thinking it may fail because the pvab might be greater than the ILP auxilliary fund.

[rcline46]

So what if pvab is greater? The ILP amount is only to determine the maximum premium, nothing else.

[Gary]

one of the incidental death benefit limits is the life insurance (based on maximum premium calculation) less cash value plus auxilliary fund. i believe it is in 74-307.

so if pvab is greater than auxilliary fund than it would presumably make total greater than incidental death ben