412(e)(3) and life insurance policies

[DMcGovern]

We just found out that the agent had a disability waiver of premium rider included on a policy for a 412(e)(3) plan. Would appreciate thoughts on if this should be allowed?

Thank you!

[frizzyguy]

Should 412(e)'s be allowed...no. Oh you meant the disability rider. I guess it's been long enough where no one has any past expirience on it.

Gut feeling, if a defined benefit plan can allow for disability, I guess I don't see why not. That being said, I am just guessing. 412(e)'s make me sad.

Final two cents, you shouldn't be the one making that determination. The broker is making big time bucks off of that policy, have him pay an attorney to get the answer for the client.

[Belgarath]

I have blessedly cleansed my mind of anything to do with 412(e)(3), or thought I had. I do seem to recall that Revenue Ruling 2004-20 specifically addressed this issue,and that it furthermore wasn't a disqualifying event necessarily, but WAS a deduction issue - that is, you couldn't currently deduct the disability waiver premuim.

If you look at 2004-20, I'm sure it will expalin this in more and better detail.

[AndyH]

Should 412(e)'s be allowed...no.

The Boards were much more lively and interactive when 412(i)'s were thriving. Posters like Quint the Shark Hunter were well fed.

[DMcGovern]

Thanks to all for the replies! I agree that 412(e)'s are a pain and probably should be extinct, but I'm not the owner of the company.

I will definitely read Rev Rul 2004-20

Thanks again

[frizzyguy]

Should 412(e)'s be allowed...no.

The Boards were much more lively and interactive when 412(i)'s were thriving. Posters like Quint the Shark Hunter were well fed.

I spent more time than I should have today reading the old posts, they were fantastic! They kinda remind me of open MEP discussions now. I also enjoyed them because now I knew what was eventually going to happen to them. The irony was that after I did that I had a prospect call who asked me about 412(e) plans vs. cash balance plans and I had to put my professional pants on and I am curious if y'all thought my response was okay.

The accountant asked if the deductions were bigger. (Suprised anyone?) I said a better way to look at it was that the maximum allowable benefits were exactly the same, but because fees tend to be higher on insurance products, that they would need to pay more to get there. I also wanted to play nice so I also said that there was probably less exposure to investment gain and loss and that was why the fees were higher. Then I unplayed nice and threw in a 412(i) jab. The broker instantly backed me up after I mentioned 412(i)'s.