merger or aquisition

Has Your Company Been Part of a Merger or Acquisition On or After January 1, 2018?

February 22, 2019

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The Tax Cuts and Jobs Act of 2017 (TCJA) modified the Transfer of Value rules pertaining to Corporate Owned Life Insurance (COLI), Bank Owned Life Insurance (BOLI), Credit Union Owned Life Insurance (CUOLI), and other types of Employer Owned Life Insurances.

If your company (or your client’s company) was involved in an acquisition on or after January 1, 2018, you will want to contact your advisors to confirm if any of the Employer Owned Life Insurance may be impacted by the modified Transfer for Value rules Section 101(a)(3)(B).

Generally speaking, the modifications resultant from the tax law changes, could result in a portion of future death proceeds being subject to tax for certain insurance policies on former employees of any businesses acquired on or after 1/1/2018.

There are multiple arguments to be made here that the status of the current language of the tax code does not reflect what lawmakers intended and that additional guidance and or tax code modifications will inevitably be forthcoming. Nevertheless, as the law presently stands, if it in fact applies to your organization’s situation, then there may be the need to report policy sale under Section 6050Yii, the acquiring company may need to reflect a Deferred Tax Liability on its books, and some portion of future death proceeds may be included in the acquiring company’s gross income. Again, note that these outcomes, if applicable affected policies would be limited to former employees of the acquired entity.

If it is determined that your policy(s) are subject to the modification, then you will want to contact your advisor and ascertain what actions, if any, should be taken.

Securities offered through Valmark Securities, Inc. Member FINRASIPC, 130 Springside Drive, Akron, OH 44333-2431, Tel: 1-800-765-5201. Investment Advisory Services offered through Valmark Advisers, Inc., which is a SEC Registered Investment Advisor. Fulcrum Partners LLC is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc.

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