Section 79 Plans: Follow the plan and get audited.: Follow the plan and get audited. What is a Section 79 Plan? Protection, Retirement, Innovation. A permanent benefit life insurance pl...
While promoted highly by insurance advisors, Section 79 plans are often abused and therefore thoroughly audited and heavily penalized for unlawful practices.
The issue
Whether an employee can participate in an employer sponsored Section 79 plan (a group term life insurance plan as defined by the IRS) to obtain permanent benefits to be used for retirement.
Facts: Client A is an employee of Firm B. Firm B makes the decision to commence a Section 79 plan for its employees. Client A has been informed that up to two-thirds of their contributions to such Section 79 plan would be tax deductible. Client A is also advised that the benefits derived from the Section 79 plan may be used for retirement benefits.
The questions
1. Under Code Section 79 and Treasury Regulation §1.79, is an employee allowed a tax deduction from individual adjusted gross income for contributions made to a Section 79 plan?
2. If allowed, to what extent is tax deductible by the employee (and/or the employer)? Distinctively, may an employee deduct up to two-thirds of contributions made to this Section 79 plan?
Under Section 79 of the Internal Revenue Code, is an employee able to receive permanent benefits to be used for retirement from an employer-sponsored Section 79 plan?
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