Another Year-End Matter: Regulations on Reporting of Company-Owned Life Insurance Contracts

Executive Compensation Blog originally appears on

On November 13, 2007, the IRS published temporary and proposed regulations applicable to company–owned life insurance (COLI) policies issued after August 17, 2006. The Pension Protection Act of 2006 added two new sections to the Internal Revenue Code affecting COLI.

• Code Section 101(j), which limits the income exclusion for death benefits paid under certain company-owned life insurance policies, unless the company meets certain notice and consent requirements, and

• Code Section 6039I, which requires that policyholders with more than one company-owned life insurance contract on employees file information returns. Under Section 6039I, each year, the company must file an information return showing:

° The number of employees of the company/policyholder at the end of the year,

° The number of employee insured under company-owned life insurance policies at the end of the year,

° The total amount of insurance in force under the policies at the end of the year,

° The name, address and EIN of the company and the business in which it is engaged, and

° That the company/policyholder has a valid consent for each insured employee or, if it has not obtained consents from all, the number of insured employees for whom it has not obtained consent.

The temporary and proposed regulations apply only to the reporting requirements of Section 6039I, and suggest that the IRS will prescribe the form and manner of satisfying these requirements in the near future, effective for employers' tax years ending after November 13, 2007.

So, get ready for another year-end filing requirement.