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Life insurance provision could cause tax headaches

For organizations with employer-owned life insurance, which is a policy owned by an entity that acts as the beneficiary, there is the potential for major tax savings. But employers must be sure they are following all of the regulations in order to see that tax advantage.

By Amanda McGrory-Dixon | Updated on October 22, 2012

For organizations with employer-owned life insurance, which is a policy owned by an entity that acts as the beneficiary, there is the potential for major tax savings. But employers must be sure they are following all of the regulations in order to see that tax advantage, says Russell Hall, senior regulatory adviser at Towers Watson, a global professional services firm in New York City.

Under the notice and consent requirements in the Pension Protection Act of 2006, an employer must notify the employee in writing that it intends to take out a life insurance policy on his or her life, and the maximum amount of the death benefit that could be insured at the time the contract is issued must be listed, says Terry Headley, president of Headley Financial Group, a financial services group in Omaha, Neb.

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