Key Elements:

• Employer owns the policy
• Employer pays premiums
• Policy’s cash value is a business asset (withdraws & loans for business purposes)
• Employee is taxed on the value of economic benefits received each year
• Employee is allowed to name a beneficiary by means of an endorsement
• 26 CFR 1.61-22 – Taxation of split-dollar life insurance arrangements

Trap Doors:

• Any premiums contributed by employee are income to employer
• Public companies and Charities
• Employees must qualify for requested death benefits
• Calculation of economic benefit
• Engineered Illustrations
• Material modifications to plan

Modeling Considerations:

1. If more than one employee is covered under the plan, aggregate
2. Not all employees with obtain the same medical U/W
3. Consider the use of multiple life insurance companies
4. Does cash surrender value cover premiums paid ?
5. Does net death benefit after repayment match employee’s expectation ?
6. Copy of life insurance illustration that is modeled
7. Projections of employee economic benefits