A new federal advisory opinion could help husbands and wives who hold life insurance policies inside employee benefit plans.
The opinion, Employee Benefits Security Administration Advisory Opinion 2006-03A, covers the case of a husband and wife who have been keeping a second-to-die life insurance policy inside a profit-sharing plan.
The husband and wife, who are both insured by the policy and are both participants in the plan, want to join together to buy the policy from the plan, for the cash surrender value, without having to pay any extra taxes as a result of that transaction, according to Seymour Goldberg, the Melville, N.Y., lawyer who is representing them.
Ivan Strasfeld, director of EBSA’s Office of Exemption Determinations, writes in the new advisory opinion that he believes the couple can buy the policy without having to pay extra federal taxes as a result.
The plan involved in the case lets participants invest assets in life insurance policies, and the husband used rollover funds to buy the second-to-die policies, Strasfeld writes.