NU Online News Service, Jan. 22, 2004, 4:55 p.m. EST, Washington – The Senate Finance Committee is expected to consider and approve industry-supported legislative language on corporate-owned life insurance Jan. 28.[@@]
“That is our understanding and our hope,” says Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va.
Plybon says the life insurance industry spent 4 months in discussions with the Finance Committee staff to develop language that the committee can consider and approve.
Under the proposed legislative language, death benefits from COLI policies will not be taxable if the deceased individual was an employee within 12 months of death, or if the death benefits are payable to the employee’s family, beneficiary, trust or estate, or are used to purchase an equity interest in the employer, such as under a buy-sell agreement.
In addition, death benefits will not be taxable if the employee is a company director or is a key person, which is defined as either a “highly compensated employee” under Section 414(q) of the tax code or a “highly compensated individual” under Section 105(h)(5), with a salary in the top 35% for the employer.
The language also requires employers to obtain the written consent of employees before purchasing coverage for them.