The Internal Revenue Service is giving insurers more advice about how to use the 2001 Commissioners’ Standard Ordinary mortality and morbidity tables.
Ann Logan, an IRS financial institutions and financial products specialist, says the IRS wants to make sure issuers of older products can continue to apply the old standards to contracts that use the 1980 CSO mortality and mobility tables, and to reduce the chances that changes to an older policy will subject it to the new standards.
The guidance provides examples of contract “changes, modifications, or exercises of contractual provisions that will not require a change from previous tables to the 2001 CSO tables,” Logan writes in IRS Notice 2006-95.
The IRS issued the guidance because Section 7702(c)(3)(B)(i) requires a life insurance policy to meet certain standards before it can qualify for the tax breaks usually accorded to life insurance policies.
One rule requires that mortality changes be “reasonable,” and that a life insurer come up with reasonable mortality charges by using an IRS-approved mortality table.