Plan owned insurance policy, premiums paid by loan

[kwalified]

a 2 participant plan has an insurance policy on one of the participants. the premiums have been paid on the policy by policy loans for the past few years, the participant is concerned that having a loan on a policy owned by the plan could be problematic. Seems as if he would have investigated this prior to issuing the loan. However, would there be any pitfalls after the fact?

[Bill Presson]

a 2 participant plan has an insurance policy on one of the participants. the premiums have been paid on the policy by policy loans for the past few years, the participant is concerned that having a loan on a policy owned by the plan could be problematic. Seems as if he would have investigated this prior to issuing the loan. However, would there be any pitfalls after the fact?

It's only problematic in that it will likely not be able to keep the policy in force for long.

[Bird]

I've heard it argued that a premium loan could trigger UBTI taxes. That might be what he's thinking about, but I don't think it's a problem.

[Guest Stefanfeb]

http://www.independentinsuranceadvice.info/

a 2 participant plan has an insurance policy on one of the participants. the premiums have been paid on the policy by policy loans for the past few years, the participant is concerned that having a loan on a policy owned by the plan could be problematic. Seems as if he would have investigated this prior to issuing the loan. However, would there be any pitfalls after the fact?

It's only problematic in that it will likely not be able to keep the policy in force for long.