NU Online News Service, Sept. 12, 2003, 4:23 p.m. EDT — Washington
The Treasury Department has issued long-awaited final rules on split-dollar life insurance arrangements, and it appears to have rejected industry requests to provide policyholders with transitional relief.
“Under these rules, companies cannot use split-dollar life insurance arrangements to provide tax-free compensation to their executives,” says Pam Olson, assistant Treasury secretary for tax policy.
“By insuring that split-dollar arrangements are appropriately taxed, the regulations curb a backdoor form of executive compensation and promote greater transparency,” she says.
The Association for Advanced Life Underwriting and National Association of Insurance and Financial Advisors, both of Falls Church, Va., had asked Treasury to extend the current safe harbors relating to existing split-dollar arrangements for one year, until Dec. 31, 2004, so that policyholders could adjust to the new regulations.
Tom Korb, director of government affairs for AALU, says agents will continue to work for an extension, but he adds that language in the Treasury Department’s release is not promising.