Which one of the following statements best describes the amount of life insuranc

Question

Which one of the following statements best describes the amount of life insurance that may be used to provide an "incidental" death benefit to participants in a qualified retirement plan?

(a) The premiums paid for a term life insurance benefit must be less than 50% of the plan cost for that participant.
(b) The participant's insured death benefit must be no more than 100 times the expected monthly plan benefit.
(c) The premiums paid for an ordinary life insruance benfit must be less than 100% of the plan cost for that participant.
(d) The participant's insured death benefit must be no more than 50 times the expected annual plan benefit.

Explanation / Answer

Ans (b) The participant's insured death benefit must be no more than 100 times the expected monthly plan benefit.

This test known as 100 to 1 test to determine the eligibility to qualify as incidental benefit plan in case of a defined benefit plan.

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