Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Moderator:
Ann Cammack, EY, Washington, DC
Panelists:
Mark Rush, MassMutual, Springfield, MA
Susan Seabrook, Buchanan Ingersoll, Washington, DC 1
Introduction
Use of variable products, both life and annuity, in private
placement products continues to grow.
Private Equity firms are looking for products that defer tax in
current earnings.
Investors are looking for income deferral options as well as
FIRPTA and UBIT blocker options.
Investment options for purchasers of variable products are
also expanding.
Hedge funds and other asset management and investment firms
are looking to expand their unique investment strategies into
the insurance dedicated fund market place.
Insurance companies are looking to expand investment options
beyond traditional mutual fund and real estate partnership
investment options.
Introduction
Successfully navigating the Section 817(h)
diversification and investor control rules is key
to the successful expansion of this industry.
This panel will:
Review the diversification and investor control
rules.
Discuss the application of these rules in the
context to todays transactions.
Section 817(h) Diversification
Requirements
Enacted in 1984, section 817(h) requires the
investments supporting a variable contract to
be adequately diversified.
5 investment test must be met.
Tested quarterly with 30 days to self-correct if a
failure is found.
IRS procedures exist to correct inadvertent
diversification failures discovered after the self-
correction period. Rev. Proc 2008-41.
Section 817(h) Diversification
Requirements
Consequences: A variable contract is not treated
as an annuity, endowment, or life insurance
contract for purposes of 72 and 7702, unless
the investments made by the segregated asset
account underlying the contract are adequately
diversified in accordance with regulations
prescribed by the Secretary.
Section 851(c) provides that all terms not defined in the subsection
shall have the same meaning as when used in the Investment
Company Act of 1940, as amended.