Remove life insurance as investment option?

[Guest boberlander]

We'd like to amend a profit sharing plan to not allow life insurance as an investment option anymore. It will still be an option for those who already have policies in the plan. What are areas of concern?

Can participants take a "distribution" of policy from plan without distributable event?

Is selling the policy within the plan the same as changing any other investments (that is, no tax consequences).

Any help is appreciated.

[Kirk Maldonado]

You might want to look at DOL prohibited transaction exemption 92-6.

[Guest PAUL DUGAN]

If you are only concerned with future new policies the admendment should be no problem. Death benefits are an incidental benefit an can be removed under 411.

However if you want to have the trustees surrender existing policies with out participant and spouses consent I have major problems. Even though I believe that the IRS would allow this, I would love to be the the attorny for the spouse of an unisurable participant who died shortly after the Trustees surrendered the policies.

If you want to get the existing policies out of the Plan I agree with Kirk you should reveiw 92-6.

If you do not want new policies the easy way is to not allow the insurance agent talk to the participants. With over 30 years in the pension field I have never heard of a Participant asking for a policy. They have to be SOLD. I have many plans that allow insurance but have not had a policy issued for years (there is no active agent involved).