FASB reached a consensus on EITF 06-10 during its March 15 meeting. EITF 06-10 applies similar logic to accounting for collateral assignment split dollar plans as that espoused under EITF 06-4 with respect to endorsement split dollar. It was expected to be ratified by FASB on March 28.
This AALU Bulletin provides a synopsis of the EITF along with a brief recap of its history.
On March 16, the IRS publicly released private letter ruling (PLR) 200711014. Essentially, the policyholder wanted to confirm that an exchange of a “partial block” of existing policies would qualify for treatment under section 1035 (and not be considered a partial exchange). PLR 200711014 concludes that a partial block of policies (e.g. those covering the lives of remaining active employees) can be exchanged. This interpretation allows corporations to retain policies on terminated or retired employees within an overall block of policies while exchanging those on actives, thereby avoiding potential 264(f) loan interest disallowance (as asserted by the IRS in PLR 200627021).