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Issue: Under federal law, if an employer amends an employee life insurance benefit program and no longer requires employees to contribute to the premiums and offers a lump-sum payment as reimbursement for previous premiums paid, is there an argument that the lump sum payment is a type of bonus?
| Area of Law: | Insurance Law, Tax Law |
| Keywords: | Lump-sum payment; Type of bonus; Reimbursement for previous premiums paid |
| Jurisdiction: | Federal |
| Cited Cases: | None |
| Cited Statutes: | None |
| Date: | 02/01/2001 |
The lump-sum payment could be taxed as a "bonus" equal to the accumulated economic benefit of the policy; i.e., the cumulative amount that would have been taxable as the excess premium amount over the P.S.-58 amount in years one through five. See Lawrence Brody and Lucinda Althauser, An Update on Business Split-Dollar Insurance, 133 Trusts & Est. 10, at B-702 (Apr. 1994) (describing a modified PS-58 split with bonus).
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