Insurance Broker Decries 401(k) Disability Policy Uncertainty

June 3, 2010 ( – A Danbury, Connecticut, insurance broker says the U.S. Treasury Department has “effectively” done away with an insurance product that continues customers’ 401(k) contributions when they are disabled.

Corporate Compensation Plans, Inc. said in a news release that Treasury officials proposed regulations in 2007 effectively revoking two prior private letter rulings by the Internal Revenue Service (IRS) that allowed 401(k) participants to purchase the disability insurance with their 401(k) contributions. The firm said that, as a result of the private letter rulings, major insurance companies created a special group disability policy for the 401(k) plan market.

The company argued that the government has not finalized the 2007 proposal, creating uncertainty among employers considering adding the offering to their benefits lineup.

In all fairness to the Treasury, it has been burdened with the unprecedented workload thrown upon it because of the results of the recession, the new Health Insurance regulation, and the re-assignment of some of its personnel. However, given the severe threat of a disability to almost every 401k participant’s financial security, exempting the 401k-disability plan from its proposed regulations should be a Treasury priority,” the announcement said.

Corporate Compensation Plans added in its news release: “Note, in the interest of full disclosure, Corporate Compensation Plans is an insurance broker and has a vested interest in being able to market 401k insurance to its clients and prospects.”