Date: Sun, 12 Oct 2003 11:10:11 CST
From: brian.venn@investmet.com (Wooglin)
Newsgroups: misc.invest.financial-plan
Subject: Re: Buying life insurance within a 401(K)
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There is a rule that limits your contributions to life insurance
inside qualified plans.  Life insurance can only be offered in a QP if
it is considered an "incidental" benefit.  Essentially, the plan's
purpose cannot be to solely provide insurance coverage.

Variable Universal Life and Universal Life contributions are limited
to 25% of your annual contributions.  You can choose to allocate up to
50% of your contribution to Whole Life, if you wish.  There are some
exceptions to these limits if you have "seasoned" money in the plan
already.  This means that if you have contributions inside the plan
that are older than 5 years, they are exempt from these limits.  You
could reposition these assets into the insurance at any time without
restriction.

Wooglin



shempmcgurk@netscape.net (Shemp McGurk) wrote in message news:...
> I understand that one cannot buy life insurance within an IRA but can
> within a 401(k)...is that correct?
> 
> How is it done?  
> 
> Does that particular 401(k) plan have to allow it or can it be done
> within any 401(k)?
> 
> What are the tax implications and how are taxes determined when
> premiums are paid with 401(k) funds?
> 
> Who owns the plan...the 401(k) or the individual?
> 
> If the 401(k) owner pays for insurance premiums before age 59 1/2, are
> there 10% penalty charges for early withdrawals?  If so, is there an
> exception that can be set up to avoid the penalty?
> 
> Thanks in advance for your answers to these questions...