5500: reporting life insurance premium

[doombuggy]

3 person PSP where the owner has a life insurance policy within the plan.

She paid the premium of $6500 by moving assets out of the profit sharing pooled account. The life insurance policy is titled under the plan.

Would you put this $6500 on line 8d - benefits paid including direct rollover and insurance premiums to provide benefits, or maybe on line 8g - other expenses?

[Bird]

I've seen it done both ways, neither of which, IMO, are correct. I see the insurance as just another asset of the plan, so the premium itself is a purchase of a (different) asset, not directly reportable on the income statement. It will almost surely be worth a lot less at the end of the year than the premium, and that difference would show up as a loss in the other income line.

If the purchase of a policy or annuity is a transfer of liabilities to the insurance company then I think it might be a benefit paid. We never do that so I'm not sure.

[Bill Presson]

I've seen it done both ways, neither of which, IMO, are correct. I see the insurance as just another asset of the plan, so the premium itself is a purchase of a (different) asset, not directly reportable on the income statement. It will almost surely be worth a lot less at the end of the year than the premium, and that difference would show up as a loss in the other income line.

If the purchase of a policy or annuity is a transfer of liabilities to the insurance company then I think it might be a benefit paid. We never do that so I'm not sure.

This is how we've always done it. Treat it like a transfer into a "fund" and then post a gain/loss to get back to the ending cash value.

[ETA Consulting LLC]

This is how we've always done it. Treat it like a transfer into a "fund" and then post a gain/loss to get back to the ending cash value.

I've always done it the way Bill Presson stated. The funds never left the plan because the life insurance policy is owned by the plan; so it shouldn't be reported as such.

Good Luck!