79. Treatment of insurance dividends and other credits, fully insured plans

Statement of Requirement: Reg. § 1.404(a)-8; Rev. Rul. 60-33, 1960-1 C.B. 152

(Note to reviewer: All nontrusteed plans (plans designated as funded only with insurance contracts) must include this provision in lieu of LRM #78.)

Sample Plan Language:

No contract will be purchased under the plan unless such contract or a separate definite written agreement between the employer and the insurer provides that: (1) no value under contracts providing benefits under the plan or credits determined by the insurer (on account of dividends, earnings, or other experience rating credits, or surrender or cancellation credits) with respect to such contracts may be paid or returned to the employer or diverted to or used for other than the exclusive benefit of the participants or their beneficiaries. However, any contribution made by the employer because of a mistake of fact must be returned to the employer within one year of the contribution. If this plan is funded by individual contracts that provide a participant's benefit under the plan, such individual contracts shall constitute the participant's account balance. If this plan is funded by group contracts, under the group annuity or group insurance contract, premiums or other consideration received by the insurance company must be allocated to participants' accounts under the plan.