Whatley, Drake & Kallas (WDK) is investigating certain life insurance policies and retirement plans which have been sold, particularly to medical professionals, and were formed under Section 412(i), 419A and 419(e) of the Internal Revenue Code. Generally speaking, these are presented as tax-qualified retirement plans to be funded entirely by one or more life insurance policies or annuities. The employer claims tax deductions for contributions that are used by the plan to pay premiums on the insurance policies covering the employees. The plan may hold each policy until the employee dies, or it may distribute or sell the contract to the employee at a specific point, such as when the employee retires.

In the last few years, the IRS has begun targeting a specific variant of these plans because of the way in which the life insurance was structured. In the cases at issue, the insurance policy was designed so that the policy’s cash surrender value was temporarily depressed significantly below the premiums that had been paid to that date. The policy was then distributed or sold to the employee for the amount of the (artificially depressed) cash surrender value; thereafter, the cash surrender value would increase significantly (or “spring”) to be far closer to the amount that had been paid in premiums to date. As a result, the employer’s recognized tax deductions were for amounts far in excess of what the employee recognized in income at the time he purchased or received the policies. If you have a  we would be interested in talking with you about recovering your losses from those individuals who sold you the plan.

If you have a 412(i), 419A or 419(e) retirement plan that has been, or may be, challenged by the Internal Revenue Service on this or any other grounds,and wish to discuss your legal rights, please call us at 1-(800)-922-4851 or Contact WDK to submit a request for more information.