Economic Benefit of Life Insurance in Pension Plans and Split Dollar Arrangements (P.S. 58 Costs) - January 8, 2002

The IRS provides interim guidance on split-dollar life insurance arrangements and states that a taxpayer may rely on the interim guidance until the IRS issues final regulations.  The new guidance published in Notice 2002-8 replaces the guidance provided last year under Notice 2001-10.  This notice also includes the P.S. 58 cost table used to value the economic benefit received by the plan participant covered by life insurance in a qualified retirement plan.  This table remains unchanged from the one published in Notice 2001-10; however, the IRS republished the table in Notice 2002-8 because it revoked Notice 2001-10.  The new table generally applies to arrangements entered into on or after January 28, 2002.  For arrangements entered into after January 28, 2002, and before the effective date of future guidance, a plan is permitted to use the lower of:

1.  The cost published in the table in Notice 2002-8; or

2.  The insurance company's published premium rates (available for standard risks).

© 2002 Milberg Consulting LLC  All Rights Reserved

We intend the information in this publication as a general resource, not as legal or plan compliance advice or counsel. If you consider any actions discussed herein, we suggest that you consult a tax or ERISA professional. Milberg Consulting LLC and Barry R. Milberg do not warrant and are not responsible for any errors and omissions from this information.