Split-Dollar Insurance Can FinanceEmployee Benefit

January 20, 2005, 1:00 a.m. EST 1 Min Read

ALEXANDRIA, Va. - (01/20/05) -- A federal credit union may useso-called split-dollar life insurance to fund employee benefitobligations, according to NCUA in a new legal opinion letter. Undersplit-dollar insurance, the policy is owned by the employee andpaid for by the credit union, which treats the obligation as anominal loan to the employee, in order to conform toe IRSregulations to obtain favorable tax treatment. The agency alsoconfirmed that the split-dollar arrangement also complies withNCUA's rules and regulations covering benefits foremployees.

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