COLI/BOLI/ICOLI

Has Your Company Been Part of a Merger or Acquisition On or After January 1, 2018?

Has Your Company Been Part of a Merger or Acquisition On or After January 1, 2018?

Author Executive Benefits Team
Date February 22, 2019
Share

The Tax Cuts and Jobs Act of 2017 (TCJA) modified the Transfer of Value rules pertaining to Corporate Owned Life Insurance (COLI), Bank Owned Life Insurance (BOLI), Credit Union Owned Life Insurance (CUOLI), and other types of Employer Owned Life Insurances.

If your company (or your client’s company) was involved in an acquisition on or after January 1, 2018, you will want to contact your advisors to confirm if any of the Employer Owned Life Insurance may be impacted by the modified Transfer for Value rules Section 101(a)(3)(B).

Generally speaking, the modifications resultant from the tax law changes, could result in a portion of future death proceeds being subject to tax for certain insurance policies on former employees of any businesses acquired on or after 1/1/2018.

There are multiple arguments to be made here that the status of the current language of the tax code does not reflect what lawmakers intended and that additional guidance and or tax code modifications will inevitably be forthcoming. Nevertheless, as the law presently stands, if it in fact applies to your organization’s situation, then there may be the need to report policy sale under Section 6050Yii, the acquiring company may need to reflect a Deferred Tax Liability on its books, and some portion of future death proceeds may be included in the acquiring company’s gross income. Again, note that these outcomes, if applicable affected policies would be limited to former employees of the acquired entity.

If it is determined that your policy(s) are subject to the modification, then you will want to contact your advisor and ascertain what actions, if any, should be taken.

Share

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through Lion Street Advisors, LLC (LSA) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI and LSF/LSA are non-affiliated entities and separate entities from OneDigital.

Unless otherwise noted, VAI/VSI, LSF/LSA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

Lion Street Advisors // Lion Street Financial

Subscribe to Get Executive Benefits News in Your Inbox

How would you like to subscribe?(Required)
Get news as it's published, or get our newsletter with key updates 2-3 times per month.
This field is for validation purposes and should be left unchanged.