It is anticipated that for new plans, the IRS will provide split-dollar life insurance premium factors in addition to individual premium factors and will permit all of these new rates to be used to measure the term costs in plans entered into prior to September 17, 2003 as well as in new plans.
The authors calculated the survivorship term rates based on Table 2001 factors and found that they are actually lower than one insurer’s existing alternative survivorship term rates up to the age where a husband and wife are both seventy. Thereafter, the rates cross over so that the insurer’s alternative survivorship rates are lower than the survivorship rates based on Table 2001 factors. In addition, the survivorship rates based on Table 2001 factors will always be lower than the U.S. 38 rates commonly used in survivorship plans before the new regulations because the U.S. 38 rates are based on the higher P.S. 58 rate table. The favorable conclusion is that, in many if not most cases, survivorship split dollar plans will be able to use more favorable survivorship rates than the survivorship rates previously used in those plans.
To learn more about split-dollar policies, visit our article Types of Split-Dollar Plans.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM