Benefit News

Pension Protection Act and COLI Best Practices

August 10, 2006 - The Pension Protection Act of 2006 is a comprehensive piece of legislation that primarily affects pension and savings plans. The Act provides for stronger funding of pension and multi-employer pension plans. The Act also contains many other benefit-related provisions that affect a variety of arrangements.

Major provisions of the Act are referred to as the COLI Best Practices provisions. These new rules confirm that death benefits from COLI arrangements satisfying life insurance industry best practices will continue to enjoy exemption from income taxation for death benefits. The provision contains a fairly broad definition of what constitutes an "employer-owned life insurance contract." The provision requires annual reporting and recordkeeping by applicable policyholders that own one or more employer-owned life insurance contracts.

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