Paying tax on the growing cash value clearly has little appeal, and experts expect to see minimal creation of new equity arrangements falling under the economic benefit regime. However for non-equity arrangements-which still function as an attractive employee benefit, according to New York Life's Barry-annual taxation is simply on the term cost of the insurance. Unfortunately, that cost can no longer be computed using carriers' old, inexpensive rates. Instead, Weinberg says, the final regs require use of a new life insurance premium factor, not yet published at the time of this writing, but expected to be higher than carriers' old rates and lower than those found in Table 2001 (issued in IRS Notice 2001-10). Until the new figure is released in the Service's monthly Internal Revenue Bulletin, use Table 2001 to calculate the insurance cost, Weinberg advises.
Although the final regs are only 90 days old, back rooms at insurance companies and consultancies are already birthing techniques that can leverage the new rules. But then, isn't that what regime change is all about?