Notice 2001-10, addresses the income tax implications of equity split-dollar arrangements. Many overlooked, however, the fact that Notice 2001-10 also updates the P.S. 58 table, which sets forth the value of life insurance protection provided by a qualified retirement plan or a split-dollar life insurance arrangement. The new premium rates, which are set forth in Table 2001, are based on the mortality experience reflected in the Table I rates for group term life costs.

The Table 2001 rates are "materially lower" than the old P.S. 58 rates, which were last issued in 1955. For example, $100,000 of net insurance coverage for a 50-year-old individual would have had a P.S. 58 cost of $922 under the old table, versus a Table 2001 cost of $230. For a 35-year-old individual, the cost of $100,000 of net insurance protection drops from $321 under the old table to $99 under Table 2001.

Rev. Rul. 66-110, C.B. 1966-1, 12, permits a taxpayer to use the lesser of the P.S. 58 rate or the insurer's published premium rates for one-year term insurance. In recent years, the P.S. 58 rates functioned as an upper limit on the value of current life insurance protection because they no longer bore an appropriate relationship to the current fair market value of such protection. Thus, the insurer's rates became the norm. In the notice, IRS raises questions about the appropriateness of the insurers' published term rates, suggesting that in some instances those rates may not be realistically available to everyone who applies for term insurance and that different variables may be applied to different policies. As a result, IRS states that it believes that "it may be preferable" to have one or more rate tables prescribed for this purpose.

The old P.S. 58 rates may continue to be used for tax years ending on or before December 31, 2001. While the new Table 2001 rates replace the P.S. 58 rates in 2002, the new rates may be used for tax years ending after the date of issuance of Notice 2001-10. Taxpayers may continue to use their insurer's published premium rates through December 31, 2003, and also may continue to use those rates after 2003 if the insurer complies with specified requirements concerning availability of standard rates to all individuals who apply for term insurance.

IRS states that it intends to issue further guidance in these areas after reviewing comments from the public. Written comments should be submitted to: CC:FIP (Notice 2001-10), Room 4300, IRS, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.