December 2007


OCC Informal Clarification regarding SA BOLI RWA Constraint

We have received both verbal and written clarification from the OCC regarding a possible ambiguity contained within OCC Bulletin 2004-56 regarding the proper application of risk weights to a separate account BOLI policy. OCC 2004-56 states that the minimum risk-weight for the carrying value of a separate account BOLI “policy” is 20%.

We wanted confirmation that an underlying investment fund can be risk-weighted at less than 20%, provided that the weighted average of all investment funds within a given “policy” is at least 20%. A Risk Expert within the OCC’s Capital Policy area was kind enough to provide an email confirming this interpretation to us. We are working on models to help illustrate the possible ramifications of this approach (i.e., in contrast to a 20% minimum per investment division) and would be happy to discuss this further with those interested.



IRS Releases Draft Form 8925 for Recordkeeping Requirements under 6039I

The IRS has finally, after several months delay, issued a new (DRAFT ONLY) Form 8925 for employers to satisfy the reporting requirements under Section 60391. This new reporting only applies to employers making new BOLI purchases after August 17, 2006 (the effective date of Section 101(j)/COLI BPA).

This follows the proposed and temporary regulations issued in November. We are following up with counsel to see when a final form may be expected.



Fifth Third Bancorp Announces Charge to Earnings

Last week, Fifth Third Bancorp announced a large charge to earnings and attributed a portion of it to one of its SA BOLI policies. In light of the number of inquires we have received from clients and others regarding this development, we prepared a special report summarizing our understanding of the factors which may have contributed to this situation.