Split Dollar Insurance plans are plans whereby both the employer and the employee “split” and share the costs and “split” and share the benefits associated with owning a life insurance policy.
Split Dollar Insurance Plans are non-qualified plans (NQDC).
There are no ERISA (Employment Retirement of 1974) requirements since plan is non-qualified.
The employer can discriminate as to who participates in a Split Dollar plan and the employer has freedom to select the employee(s), including themselves, who are to be the beneficiaries of plan.
Typically, the employer pays the premium less the amount associated with the PS 58 rate or the insurance company’s annual renewable term rate, which is paid by the employee. However; the employer as an option can bonus additional “salary” to cover any tax liability.
Generally, these types of plans are used as supplemental plans to other company or organization retirement plans; however, they can stand alone and can be incorporated in various ways into employer benefit programs.
Split Dollar plans can be used to fund: family insurance needs, non qualified retirement plans, cross purchase buy-sell agreements, estate liquidity and wealth transfer plans.
Split Dollar plans are simple to install, do not have major reporting, have no significant filing requirements, and no IRS approval is required.
Through a “Collateral Assignment” and or the “Endorsement Method” policy ownership, cash values and death benefits can be structured in various ways to accommodate the interests of the employer and the employee.
Split Dollar Insurance plan policies are state specific, and not all insurance companies offer deferred compensation plan policies to companies and or organizations in all states.
The death benefit payable to a beneficiary upon the death of the insured is dependent on the claims paying ability of the issuing life insurance company.
