Chapter 3
Split Dollar Plans

The important points addressed in this lesson are:

Split dollar plans are generally easy to understand and simple to administer

Split dollar plans always involve at least 2 parties: the insured with the life insurance need and the party willing to assist the insured in buying the coverage-usually an employer

The traditional split dollar approach, calling for the employer to pay premiums equal to the policy's cash value increase, has certain drawbacks that may make other split dollar approaches more attractive

Split dollar plans offer important benefits to both an employer and the employee

The major markets for split dollar plans include corporations, non-corporate business organizations and family situations

The major variations on traditional split dollar, including level outlay, employer pay all and employee pay REB, were designed to meet specific situations and overcome traditional split dollar concerns

The employer, the insured employee or a third party may own a life insurance policy issued in a split dollar plan-or the ownership may be split

Split dollar plans may be used by the insured to meet business or personal insurance needs

The decline in the personal beneficiary's death benefit due to the employer's increasing interest may be overcome by using the 5th dividend option or through an increasing term insurance rider

In endorsement split dollar plans, the policy is owned by the employer who endorses the right to name a beneficiary to the employee

In collateral assignment split dollar, the policy is owned by the employee who assigns it as collateral to secure the employer's premium payments

Split dollar rollout refers to the termination of the split dollar plan and transfer of the policy to the employee

Split dollar tax treatment depends on who owns the policy; if owned by the employer, the employee must include the reportable economic benefit in income; if owned by the employee, the employer's premiums are deemed to be either loans or additional compensation


Characterisitcs of Split Dollar Plans
Traditional Split Dollar Plan Approach
Split Dollar Benefits
Prospects for Split Dollar Plans
Technical Considerations
Policy Ownership
Split Dollar Taxation
Chapter 3 Review