While life insurance cannot be owned in a Simplified Employee Pension (SEP) or Individual Retirement Accouct (IRA), IRS regulations do allow the inclusion of life insurance policies in some profit sharing and defined benefit plans. These plans tend to be complex to administer and need to adhere to strict rules that require the life insurance protection provided be only “incidental” to the retirement benefits provided by the plan.
Things To Know:
- Having the opportunity to pay life insurance premiums with pre-tax dollars is appealing, but the costs and complexity of meeting all the requirements may outweigh the benefits.
- An individual policy may be easier to manage and offer more flexibility in deciding what kind and how much coverage to own.
- Qualified retirement plans that allow life insurance are defined contribution plans and defined benefit plans.
- If the plan is terminated early or the participant retires, the remaining balance can be rolled over into an IRA.
Life Insurance Retirement Plans can be very complex and may not be the best option given your current financial situation or goals. Get in touch with a Primero representative to determine the best strategy for you.