Proposed Rule Includes Split-Dollar Section

Grandfathered arrangements may be subject to rules given in guidance issued in 2002.

For other arrangements, “the amount includible in income generally would be determined by applying the split-dollar life insurance rules to the arrangement in conjunction with the general rules providing assumptions on payment dates of deferred amounts,” officials write.

However, in the case of an arrangement subject to 26 Code of Federal Regulations Section 1.7872-15, which deals with split-dollar loans, “to the extent the rules regarding time and form of payment and other payment assumptions under these proposed regulations conflict with the provisions of Section 1.7872-15, the provisions of Section 1.7872-15 would apply instead of the conflicting rules under these proposed regulations,” officials write.

As indicated in a notice issued in 2007, “the portion of the benefit provided under the split-dollar life insurance arrangement consisting of the cost of current life insurance protection is not treated as deferred compensation for this purpose,” officials write.

Meanwhile, the nonqualified plan correction guidance, given in IRS Notice 2008-113, discusses topics such as which service providers are eligible for relief; eligibility for relief for service recipients that are experiencing financial problems; corrections of failures that occur during the same taxable in which the failure occurs; and relief for failures involving limited amounts.

A copy of the notice of proposed rulemaking is available here.