Notice 2001-10

(This Item Posted April 2001)

Prepared By: Eugene A. Ferreri, Jr.

First Citizens Bank

Raleigh, North Carolina

The one-year premium rates set forth in Revenue Ruling 55-747 (the "PS-58 rates") are used to set the value of current life insurance protection for participants under qualified retirement plans. This value is taxed to the participants on an annual basis. An alternative to the use of PS-58 costs is to use the published rates for one-year term insurance for all standard risks for the insurer involved if they are lower.

The IRS notes two problems with the current method. The PS-58 rates are based on 1946 mortality table which does not reflect current conditions. This could cause an overstatement of the value of the current insurance protection. In addition, the IRS questions the use of "published " rates by an insurer for one-year term coverage available to all standard risks. These rates may be theoretical rather than a reflection of actual policies issued and therefore may be too low.

To combat these problems, the IRS announced three changes to the treatment of current life insurance protection under qualified plans.

1. Revenue Ruling 55-747 is revoked. Taxpayer may only use PS-58 costs to value current life insurance protection for years ending on or before December 31, 2001.
2. Table 2001 as set forth below may be used for taxable years ending after January 29, 2001. This table is meant to be interim guidance until full consideration of how current life insurance protection should be computed is completed.
3. Taxpayers may continue to use the insurer’s published rates to determine the value of the life insurance protection. However, there are two additional limitations.
1. First, for periods after December 31, 2003, the IRS will not consider the published rates to be available to all standard risks unless
1. The insurer generally makes the availability of such rates known to people applying for term insurance,
2. The insurer generally sells insurance at such rates through normal channels, and
3. The insurer does not more commonly sell term insurance at higher rates to standard risks
2. Second, for policies issued after February 28, 2001, there is no guarantee that the published rates may be used for periods after the later of December 31, 2003 or December 31 of the year in which further guidance is issued on this matter.

AGE	RATE	AGE	RATE	AGE	RATE
0	.70	34	.98	68	16.92
1	.41	35	.99	69	18.70
2	.27	36	1.01	70	20.62
3	.19	37	1.04	71	22.72
4	.13	38	1.06	72	25.07
5	.13	39	1.07	73	27.57
6	.14	40	1.10	74	30.18
7	.15	41	1.13	75	33.05
8	.16	42	1.20	76	36.33
9	.16	43	1.29	77	40.17
10	.16	44	1.40	78	44.33
11	.19	45	1.53	79	49.23
12	.24	46	1.67	80	54.56
13	.28	47	1.83	81	60.51
14	.33	48	1.98	82	66.74
15	.38	49	2.13	83	73.07
16	.52	50	2.30	84	80.35
17	.57	51	2.52	85	88.76
18	.59	52	2.81	86	99.16
19	.61	53	3.20	87	110.40
20	.62	54	3.65	88	121.85
21	.62	55	4.15	89	133.40
22	.64	56	4.68	90	144.30
23	.66	57	5.20	91	155.80
24	.68	58	5.66	92	168.75
25	.71	59	6.06	93	186.44
26	.73	60	6.51	94	206.70
27	.76	61	7.11	95	228.35
28	.80	62	7.96	96	250.01
29	.83	63	9.08	97	265.09
30	.87	64	10.41	98	270.11
31	.90	65	11.90	99	281.05
32	.93	66	13.51
33	.96	67	15.20