In Notice 2009-47, the IRS requests comments on a proposed safe harbor regarding the application of Internal Revenue Code (IRC) Sections 7702 (definition of life insurance) and 7702A (definition of modified endowment contracts) to life insurance contracts that continue after an insured attains age 100. The need for guidance arises from the new 2001 CSO tables, which extend to age 121, while the computational rules of IRC Section 7702 assume a contract matures between ages 95 and 100.

Under a proposed safe harbor, the IRS will not challenge the qualification of a contract as a life insurance contract or assert that a contract is a MEC if the contract satisfies all of the “Age 100 Testing Methodologies” set forth in the Notice. One of the requirements of the safe harbor is that a contract remaining in force after age 100 would be required to provide at all times a death benefit equal to or greater than 105 percent of its cash value.

In Notice 2009-48, the IRS provides guidance concerning the treatment of employer-owned life insurance contracts under IRC Sections 101(j) and 6039I (information reporting with respect to employer-owned life insurance contracts). The Notice clarifies the definition of “employer-owned life insurance contract” and provides guidance with respect to several other provisions.

The Notice was effective June 15, 2009. Further, the IRS states that it will not challenge a taxpayer who made a good faith effort to comply with IRC Section 101(j) based on a reasonable interpretation of that provision before that date. No guidance is given as to what constitutes a “reasonable interpretation” of IRC Section 101(j). Comments should be submitted on or before October 13, 2009.