Internal Revenue Service officials have proposed a safe harbor for life insurance contracts that mature after the insured attains age 100.
The IRS is seeking comments on the safe harbor proposal, and it also wants comments on the treatment of amounts received under a life insurance contract after it has matured.
The principal author of the request for comments, given in IRS Notice 2009-47, is Donald Drees.
Currently, sections 7702 and 7702A of the Internal Revenue Code set rules that assume a cash-value life insurance policy will mature when the insured attains an age of 95 to 100.
Policies that fail IRS tests are treated as modified endowment contracts and no longer come under the same tax rules that apply to life insurance policies
In 2004, the National Association of Insurance Commissioners made the 2001 Commissioners Standard Ordinary mortality tables the prevailing commissioners’ standard tables, officials write in the IRS notice.
“Unlike the 1958 Commissioners Standard Ordinary Mortality Tables…and the 1980 Commissioners Standard Ordinary Mortality Tables…, the 2001 CSO tables extend to age 121,” officials write. “As a result, an increasing number of issuers now develop contracts with maturity dates beyond age 100, even though the qualification of the contracts as life insurance contracts (and as MECs) is tested using computational rules that deem the contracts to mature between the date the insured attains age 95 and the date the insured attains age 100.”