The living benefits may be availed of through any of four nonforfeiture
benefit options: a) loan value, b) extended term insurance, c) paid up insurance, and d) cash surrender value.
(A policy expires when it has run past its grace period with premiums unpaid and has exhausted any benefits available under the nonforfeiture
option or when the policyowner has allowed the policy to lapse by not paying the next premium due and then decides to cash in the policy.)
(1) The cash value of the policy is also known as the nonforfeiture
value since this is the least amount the insurer can pay to a surrendering policyholder.
For example, if the plan had used higher interest rates or a mortality table with shorter life expectancies to determine the annuity amount, then the amount that exceeded the benefit derived would have been subject to the nonforfeiture
rules and would have been included in the employee's annual benefit.
challenged in court for violating ERISA nonforfeiture
As a result, preneed insurance policies issued on or after January 1, 2009, and before January 1, 2012 can use the 2001 CSO Mortality tables that lists different mortality rates for men and women to determine the minimum standard for reserves and nonforfeiture
Generally, any vesting (nonforfeiture
) provision permitted by the Code can be used in a profit sharing plan; however, special vesting requirements must be met with respect to matching contributions.
* The nonforfeiture
provision shall be appropriately captioned;
Furthermore, by standing as ready purchasers of policies, firms in the secondary market could discourage the repeal of nonforfeiture
laws and keep incumbent insurers from the unfair and ultimately unworkable practice of using high lapse expectations to under price certain policies.
State laws specify standard nonforfeiture
options that companies must offer to policyholders, while the Internal Revenue Code offers certain tax advantages for policy ownership.
provisions (cash surrender, extended term and paid up insurance);
values: Those values or benefits in a life insurance policy that by law the policyowner does not forfeit, even if he or she chooses to discontinue payment of premiums.