What are PS58 costs?

You are probably asking yourself, “What is PS58 cost?” It is when group term life insurance is provided under a qualified pension plan and your employer is paying the premium out of employer contributions made to the retirement plan.

What does reduced death benefit mean?

Reduced paid-up insurance would allow the death benefit to remain in place without you being required to pay any future premiums. However, the death benefit is reduced to the amount of cash value that you had in your original life insurance policy.

What is PS 58 Income?

P.S. 58 rates are the Federal government’s one-year term rates used to compute the “cost” of pure life insurance protection. When the employer pays the premium; e.g., split-dollar plan, the P.S. 58 rates are normally applied to determine the taxable benefit passing to the insured employee.

How are PS 58 costs calculated?

TAXABLE PORTION OF PREMIUM – P.S. 58 The formula is as follows: Face amount less cash value divided by $1,000 times the table factor. The P.S. 58 costs are basis in the participant’s account and are not taxed again when distributed to the participant or beneficiary unless the participant is a Self-Employed Individual.

How are p.s.58 costs treated in a life insurance plan?

The P.S. 58 costs are basis in the participant’s account and are not taxed again when distributed to the participant or beneficiary unless the participant is a Self-Employed Individual. Death benefits payable under the life insurance policy are considered “net proceeds” and excluded from gross income.

What does it mean to have a PS-58 cost?

The PS-58 cost is the tax on the employees share of the life insurance premiums paid by the employer. The profit sharing plan must include a life insurance component & therefore it is generating the PS-58 costs.

How are death benefits calculated in life insurance?

Death benefits payable under the life insurance policy are considered “net proceeds” and excluded from gross income. Net insurance proceeds are calculated by taking the face amount of the policy less the cash value plus the accumulated P.S. 58 costs.

Is the face amount and the death benefit the same?

With term life insurance, the face amount and the death benefit are the same. Many people are shocked at what appears to be huge sums of money in life insurance death benefits. Oftentimes, the death benefit of life insurance policies can even surpass seven figures.