Chapter 4: Qualified Pension Plans

01.Core Concepts

• Term or universal life insurance policy • The aggregate life insurance policy premiums cannot exceed 25% of the employer’s aggregate contributions. • Whole life insurance policy • The aggregate life insurance policy premiums cannot exceed 50% of the employer’s aggregate contributions. • Example: Employer’s contribution to the plan is $8,000. If term insurance is purchased the premium cannot exceed $2,000 (or $4,000 for whole life). • For any permanent life insurance policy (not term), the entire policy must be either: • Converted to cash or an annuity at or before the participant’s retirement, or • Distributed to the participant