Is the death benefit limited?
The death benefit must be incidental to the primary purpose of the retirement benefits. A pre-retirement is “incidental” in a defined benefit plan if the death benefit does not exceed 100 times the projected monthly retirement benefit. For example, if the projected annual retirement benefit is the §415 maximum of $160,000, the maximum monthly benefit is $160,000 ¸12 = $13,333. The maximum death benefit protection would therefore be $1.3 million. However, the pre-retirement death benefit may be also be contribution based. Up to 66 2/3 of the total contribution may be applied to life insurance coverage. This illustration assumes the maximum permissible allocation to pre-retirement death benefit.
