FAQ 791: Insurance--How to input an insurance policy in a DC plan?

Problem: How do I code the individual insurance policies in my DC plan?

Solution: Here's an example: The Plan has one Pooled Fund, from which premiums are paid. An employee has an individual policy held by the plan. The premium amount for his policy was $300 for the plan year. The insurance is held in the profit sharing source, source 2. The cash value of his policy was $3,240 at the beginning of the year, and $3,445 at the end of the year. STEPS: 1. Specs set up in the ASC plan: Set up two Standard funds (NOT one Standard fund and one Insurance fund). Name one fund the "Pooled" fund and the other the "Insurance" fund. Code the earnings allocation on the Insurance Fund as "D-Input (Total Account)" for all groups. 2. The opening and closing values in the insurance fund for an individual will always balance to the opening and closing cash values of their insurance policy. 3. If premiums are paid from the profit sharing contribution, input the premium in either the "Transfers Out" or "Premium" field in the investment fund and in the Transfers In" field in the insurance fund: For example, Premium out of source 2 for the pooled fund for $300, and a Transfer In to the insurance fund for $300. Also, code a Withdrawal in the insurance fund for $300 as well. 4. Input the increase in cash value of $205 in the Interest field in the profit sharing source in the insurance fund. NOTES: 1. You may either input these amounts on the participant's Account Values screens, or if you use weighted average earnings calculations on the investment fund, you may enter these amounts as transactions. 2. If you want the face value of the insurance to print on the Employee Certificate, input that value in the "Prior" Face Amount field on the Insurance screen in the employee record. You can also enter the cash value in the "Current" Cash Value field on this same screen. Then print the "Non-expanded" employee statement checking the "Dates/Insurance at Bottom of Certificate" box.