Section 79 of the Internal Revenue Code permits employers to offer group life insurance to employees. The group life insurance can be provided via a master contract or a group of individual policies. Group term insurance is generally used to provide the benefit, and since coverage terminates upon retirement, participating employees typically only receive inexpensive pre-retirement death benefit protection.
However, the Treasury Regulations for Section 79 provide that group term life insurance may be combined with permanent benefits under specified circumstances, which allows the use of cash value life insurance policies. A Permanent Benefit Section 79 Plan provides employees who elect to receive more than just the group term coverage with a cost-efficient personally owned cash value policy. Thus, employees who elect the permanent benefit will have death benefit coverage extending beyond their retirement, as well as the ability to access the cash value of their permanent life insurance policy for supplemental retirement income or other purposes.
Although this is one solution for clients, more often than not Premium Finance is a more suitable option for clients looking to fund their retirement.