RMD from life insurance

[Grady]

we have a client who has life insurance within the 401(k) plan.  The owner, will be required to take an RMD this year. 

when calculating his RMD, do we include the value of the life insurance, or not? 

[Lou S.]

There is a good rundown here http://www.napa-net.org/news/technical-competence/case-of-the-week/case-of-the-week-valuing-life-insurance-contracts-distributed-from-a-401k-plan/?mqsc=E3854111&utm_source=WhatCountsEmail&utm_medium=NAPA_Net_ListNapa-Net%20Daily&utm_campaign=2016.10.20%20-%20NAPA%20eNews%20-%20(Thu)

The long and short is CSV may or may not accurately reflect the fair market value. See IRS Rev Proc 2005-25.

But yes I believe a taxable distribution of the Insurance Policy can satisfy some or all of the RMD. But I thought Insurance Policies couldn't be held after Normal Retirement Age had been met under Incidental Death Benefit Rules but maybe I'm confusing that rule.

[Larry Starr]

2 hours ago, Grady said:

we have a client who has life insurance within the 401(k) plan.  The owner, will be required to take an RMD this year. 

when calculating his RMD, do we include the value of the life insurance, or not? 

I don't think Lou S dealt with the question you asked. The answer is that the RMD is based on the value of his benefit in the plan.  If there is insurance as part of the plan, the value of the insurance is absolutely part of his account.  I have to say I'm worried that you actually ask this question.  I'm guessing you are NOT the administrative firm handling the plan, but from the investment folks?  Let the service firm do the calc; they will do it right the first time.

[ErnieG]

Grady as Lou S stated the Cash Surrender Value may or may not be the actual Fair Market Value of the contract.  The carrier should value the contract's FMV, this will usually be based on the IRS' safe harbor calculations as Lou S outlined in the Rev. Rul.