Although an in-depth analysis of the QPIP(R) strategy is beyond the scope of this article, here is a brief overview of the strategy.
With a QPIP, a retirement account, the participant, and an irrevocable trust join together to form a limited liability company (LLC) in a manner that satisfies the prohibited transaction rules of ERISA and the Internal Revenue Code. After a period of time, the LLC manager could, at his or her discretion, invest in an insurance policy that insures either the account owners life or the lives of the account owner and his or her spouse.
Once the LLC is established, the participant makes a nominal contribution to the LLC in exchange for a membership interest. This is to make sure the LLC has an insurable interest on the participant’s life, while the irrevocable trust contributes an amount which is no less than the cost of the insurance protection provided by the insurance contract anticipated to be acquired by the LLC. The balance of the contributions to the LLC comes from the retirement account.