Section 79 Plan

If you ask me what a section 79 plan is i ll tell you that it s one of the most over sold and over abused life insurance sales gimmicks in the insurance.

Section 79 plan. After you learn about the problems with section 79 plans i think like me you ll come to the conclusion that the best course of action is to avoid these plans altogether. Treasury regulation section 1 79 3 employee recognizes all taxable income in excess of 50 00 of coverage not the employer per the tax code the cost of these plans is 100 percent deductible to the corporation as an ordinary and necessary business expense under section 162 a. I wanted consumers and advisors alike learn in a full disclosure manner the problems with section 79 plans.

A section 79 plan as sold in today s marketplace is fairly simple. Section 79 plans are non qualified as defined by the internal revenue code but still offer a tax deductions for sponsoring employers. Contributions to a section 79 plan are tax deductible though for owner s and 2 or more shareholders contributions are deductible only if paid by and from a c corporation.

In the case of any plan which after december 31 1986 is a discriminatory group term life insurance plan as defined in section 79 d of the internal revenue code of 1986 formerly i r c. Employees that are participating in section 79 plan offered by a sponsoring corporation may receive up to 50 000 in group term life insurance if it is non discriminatory then they will receive it at no cost. The cost is inexpensive and deductible to the employer with no imputed income to.

If you ask an insurance company that offers these plans or an insurance agent that sells them they will tell you that they are one of the last tax favorable wealth building tools a business owner can use to grow their wealth. A section 79 benefit program may allow the following benefits. Less commonly known is that section 79 plans can also provide permanent life insurance.

1954 subparagraph a shall not apply in the case of any individual retiring under such plan after december 31 1986. The imputed cost of coverage in excess of 50 000 must be included in income using the irs premium table and. An employer typically a c corporation will purchase a group term life insurance benefit on its non key employees in the amount of 50 000 per employee.

The ability to purchase permanent life insurance with corporate dollars. Section 79 plans are commonly known for the 50 000 free term life insurance they can provide for employees. These plans are employee benefit plans established under section 79 of the internal.