Split dollar life insurance is a strategy that people can use to share the costs and benefits of a permanent life insurance policy. Life insurance policies that build a cash value can be used for this purpose. These split dollar plans are typically used in business settings between an employer and employee or corporation and shareholder. “In a split dollar plan, an employer and employee execute a written agreement that outlines how they will share the premium cost, cash value and death benefit of a permanent life insurance policy.” There is quite a bit of latitude in how a split plan agreement can be written since these plans are not subject to any ERISA rules. This article goes through the history of these plans and how they are regulated. It discusses the difference between the economic benefit arrangement and loan arrangement. Split dollar plans can be a useful tool for any employer looking to provide additional benefits to their employees.
See Richard Rosen, Split Dollar Life Insurance: How It Works, Investopedia, January 6, 2016.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
