Why It Is A Good Idea To Own Life Insurance In A Qualified Retirement Plan

Internal Revenue Service (IRS) regulations currently permits the inclusion of life insurance policies in some profit sharing and defined benefits plan if the insurance cannot be owned in a SEP or IRA. Administering these types of plans can be complex and it is important to adhere to strict rules requiring the life insurance protection that is provided be only “incidental” to the retirement benefits that the plan provides. This article discusses both the advantages and disadvantages of using life insurance in a qualified plan. It goes into how defined contribution plans and defined benefit plans are the types of qualified plans that allow life insurance. There are certain tax issues that a person with life insurance purchased in a qualified plan will have to deal with. It is also important to know about some of the exit strategies that are discussed in this article.

See Richard Rosen, Why Own Life Insurance in a Qualified Retirement Plan?, Investopedia, December 29, 2015.