t's that time of year again; the time when planners gravitate to year-end "income tax reduction" strategies. Instead of spending several weeks on each individual concept you should avoid, I thought I would do a short summary of articles to put you on notice as to the concepts I think you should avoid.
419/VEBA plans. This plan just won't die. A 419 plan is an employee benefit plan that was designed to allow business owners to tax deduct the purchase of cash value life insurance where in retirement, the plan would be terminated and the policies would revert to the owners (at which time they would then borrow from the policies tax free for retirement income).
These plans were abused so much over time that the IRS has acted several times to try and kill them. Their attempts were not really successful until Notices 2007-65; 2007-83; and 2007-84 were passed. What the notices essentially said was that if an employer funded a 419/VEBA plan with life insurance, the payment is not deductible. Not only that, plans that use cash-value life (CVL) insurance were put on the listed tax transaction list. Amazingly, firms are still pitching this plan.
Today, some administrators are using these plans for a tax-favorable, post-retirement medical plan.
t's that time of year again; the time when planners gravitate to year-end "income tax reduction" strategies. Instead of spending several weeks on each individual concept you should avoid, I thought I would do a short summary of articles to put you on notice as to the concepts I think you should avoid.
419/VEBA plans. This plan just won't die. A 419 plan is an employee benefit plan that was designed to allow business owners to tax deduct the purchase of cash value life insurance where in retirement, the plan would be terminated and the policies would revert to the owners (at which time they would then borrow from the policies tax free for retirement income).
These plans were abused so much over time that the IRS has acted several times to try and kill them. Their attempts were not really successful until Notices 2007-65; 2007-83; and 2007-84 were passed. What the notices essentially said was that if an employer funded a 419/VEBA plan with life insurance, the payment is not deductible. Not only that, plans that use cash-value life (CVL) insurance were put on the listed tax transaction list. Amazingly, firms are still pitching this plan.
Today, some administrators are using these plans for a tax-favorable, post-retirement medical plan.
t's that time of year again; the time when planners gravitate to year-end "income tax reduction" strategies. Instead of spending several weeks on each individual concept you should avoid, I thought I would do a short summary of articles to put you on notice as to the concepts I think you should avoid.
ReplyDelete419/VEBA plans. This plan just won't die. A 419 plan is an employee benefit plan that was designed to allow business owners to tax deduct the purchase of cash value life insurance where in retirement, the plan would be terminated and the policies would revert to the owners (at which time they would then borrow from the policies tax free for retirement income).
These plans were abused so much over time that the IRS has acted several times to try and kill them. Their attempts were not really successful until Notices 2007-65; 2007-83; and 2007-84 were passed. What the notices essentially said was that if an employer funded a 419/VEBA plan with life insurance, the payment is not deductible. Not only that, plans that use cash-value life (CVL) insurance were put on the listed tax transaction list. Amazingly, firms are still pitching this plan.
Today, some administrators are using these plans for a tax-favorable, post-retirement medical plan.
t's that time of year again; the time when planners gravitate to year-end "income tax reduction" strategies. Instead of spending several weeks on each individual concept you should avoid, I thought I would do a short summary of articles to put you on notice as to the concepts I think you should avoid.
ReplyDelete419/VEBA plans. This plan just won't die. A 419 plan is an employee benefit plan that was designed to allow business owners to tax deduct the purchase of cash value life insurance where in retirement, the plan would be terminated and the policies would revert to the owners (at which time they would then borrow from the policies tax free for retirement income).
These plans were abused so much over time that the IRS has acted several times to try and kill them. Their attempts were not really successful until Notices 2007-65; 2007-83; and 2007-84 were passed. What the notices essentially said was that if an employer funded a 419/VEBA plan with life insurance, the payment is not deductible. Not only that, plans that use cash-value life (CVL) insurance were put on the listed tax transaction list. Amazingly, firms are still pitching this plan.
Today, some administrators are using these plans for a tax-favorable, post-retirement medical plan.