Split-Dollar Life Insurance Calculator (2026): Endorsement vs. Loan Regime
A split-dollar plan lets an employer and an executive share one permanent life insurance policy: the company puts up the premium, the executive’s family gets a piece of the death benefit, and the company gets its money back. The catch is that the IRS taxes the executive every year on the value of the insurance protection — and how much that costs depends entirely on which of the two regimes the plan uses.
This calculator models both regimes side by side. It prices the annual economic benefit using Table 2001, the official one-year term table published in IRS Notice 2002-8, then projects the sponsor’s recovery, the net death benefit that actually reaches the executive’s heirs, and the executive’s true cost per dollar of survivor benefit over the life of the arrangement.
Split-Dollar Plan Calculator
Enter the plan terms. The economic benefit is priced with the official IRS Table 2001 one-year term rates (Notice 2002-8). Nothing here is tax advice — confirm the design with the plan’s counsel and actuary.
Valuation basis: Table 2001 at attained age 55 — $4.15 per $1,000.
Executive’s cost per $1 of survivor benefit (lower is better)
Same $1 of survivor benefit if the executive owned the policy outright
Year-by-year projection
Endorsement regime: Table 2001 rate by attained age, net amount at risk, taxable benefit and tax.
| Year | Age | Table 2001 rate | Net amount at risk | Taxable benefit | Tax |
|---|
Watch: split-dollar life insurance explained
How the two split-dollar regimes differ
Since the final split-dollar regulations took effect for arrangements entered into after September 17, 2003, a split-dollar plan is taxed under one of two mutually exclusive regimes — and the choice is not cosmetic. The endorsement method runs under the economic benefit regime: the sponsor owns the contract and endorses a portion of the death benefit to the executive's beneficiary. The collateral assignment method runs under the loan regime: the executive owns the contract and the sponsor's advances are treated as loans secured by the policy.
The practical consequence is what the executive reports each year. Under the economic benefit regime, the executive includes in income the cost of the current life insurance protection — the net amount at risk valued at the Table 2001 one-year term rates. Under the loan regime, the sponsor's payments are loans, so the Table 2001 inclusion generally does not apply; instead the executive owes interest, typically at the applicable federal rate, and that interest is either paid out of pocket or added to the advance and recovered from the death benefit.
| Feature | Endorsement (economic benefit regime) | Collateral assignment (loan regime) |
|---|---|---|
| Who owns the policy | The sponsor (employer or trust) | The executive |
| What the executive is taxed on | Table 2001 cost of the net amount at risk, every year | Interest on the sponsor's advances (imputed at the section 7872 AFR if below market) |
| Sponsor's recovery at exit | Premiums paid, or the greater of premiums paid or cash value | Advances plus accrued interest |
| Employer deduction | Premiums are generally not deductible | The interest portion may be partly deductible as business interest |
| Executive's access to cash value | Usually only through a rollout or termination | Full access from day one as policy owner |
| Exit mechanics | Rollout transfers policy value to the executive (taxable under section 83 or section 61) | Loan repayment or forgiveness; forgiveness is taxable compensation |
| Documentation | Split-dollar agreement plus an endorsement | Split-dollar agreement, promissory note and collateral assignment |
| Typical use | Long-tenure executives where the employer wants control of the asset | Shorter funding windows and equity-style designs where the executive should own the policy |
What the economic benefit actually costs: IRS Table 2001
The economic benefit regime does not tax the premium. It taxes the value of the protection the executive is receiving — the death benefit in excess of the sponsor's interest, multiplied by an IRS-published one-year term rate. Those rates come from Table 2001, issued in IRS Notice 2002-8. Table 2001 replaced the older P.S. 58 rates from Revenue Ruling 55-747, which were built on 1950s mortality and produced inclusion amounts that were often several times higher than commercial term rates.
The table is unisex, applies to single-life coverage, and is quoted per $1,000 of protection for a full year. A plan may instead value the protection using the carrier's lower published one-year term rates, but only if those rates are generally available to all standard-risk applicants through the insurer's normal distribution channels — a condition Notice 2002-8 tightened for periods after December 31, 2003.
| Attained age | Table 2001 cost per $1,000 (annual) | Economic benefit on a $1,000,000 net amount at risk |
|---|---|---|
| 30 | $0.87 | $870 |
| 35 | $0.99 | $990 |
| 40 | $1.10 | $1,100 |
| 45 | $1.53 | $1,530 |
| 50 | $2.30 | $2,300 |
| 55 | $4.15 | $4,150 |
| 60 | $6.51 | $6,510 |
| 65 | $11.90 | $11,900 |
| 70 | $20.62 | $20,620 |
| 75 | $33.05 | $33,050 |
| 80 | $54.56 | $54,560 |
Note how steeply the inclusion climbs with age: the same $1,000,000 of net amount at risk costs the executive $990 of reportable income at 35 and $33,050 at 75. That is why the funding window matters so much. Every year the sponsor's recovery grows, the net amount at risk shrinks, and the economic benefit with it — but the rate itself is working the other way, and past age 70 the rate wins.
Worked example: a $1,000,000 policy on a 55-year-old executive
Take a plan where the sponsor advances $40,000 a year for ten years on a $1,000,000 policy issued at age 55, funds 100% of the premium, recovers premiums dollar for dollar, and the executive is in the 35% bracket. Twenty years later the arrangement terminates. Here is what each regime produces at those terms.
| Metric | Endorsement (economic benefit) | Collateral assignment (loan, 5%) |
|---|---|---|
| Sponsor's advances over 10 years | $400,000 | $400,000 |
| First-year taxable amount to the executive | $4,150 (Table 2001 at age 55) | $1,000 of interest (5% on a $20,000 average balance) |
| Cumulative executive cost over 20 years | $60,939 of income tax | $300,000 of interest |
| Sponsor's recovery at termination | $400,000 | $400,000 |
| Net death benefit to the executive's heirs | $600,000 | $600,000 |
| Executive cost per $1 of survivor benefit | $0.10 | $0.50 |
The comparison is the whole point of the calculator. Both regimes deliver the same $600,000 to the family at these terms, but the endorsement version costs the executive about $61,000 of tax over twenty years while the loan version costs $300,000 of interest. If the loan interest is capitalized instead of paid, the advance balloons to roughly $840,000 and the family's net benefit collapses to about $160,000 — the sponsor's interest quietly eats most of the death benefit.
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That result is not universal. The loan regime wins when the policy's cash value compounds faster than the advance rate, when the funding window is short, or when the executive is older and Table 2001 rates are punishing. The calculator lets you move every one of those levers.
Economic benefit by face amount and age
Because the executive's reportable income is a function of the net amount at risk, the size of the policy drives the annual cost directly. This table prices the first year of a plan at three issue ages and three face amounts, using the Table 2001 rates above.
| Death benefit | Age 45 ($1.53 per $1,000) | Age 55 ($4.15 per $1,000) | Age 65 ($11.90 per $1,000) |
|---|---|---|---|
| $500,000 | $765 | $2,075 | $5,950 |
| $1,000,000 | $1,530 | $4,150 | $11,900 |
| $2,000,000 | $3,060 | $8,300 | $23,800 |
A $2,000,000 arrangement on a 65-year-old executive creates almost $24,000 of reportable income in year one at a 35% bracket — roughly $8,300 of tax in exchange for the employer carrying the premium. Whether that trade is worth it depends on how long the executive stays, how the recovery formula is written, and what happens at exit.
The loan regime: where the cost hides
Loan-regime designs are popular precisely because they avoid the annual Table 2001 inclusion. The executive is not taxed on the premium advance. What the design does instead is charge interest, and that interest has to come from somewhere: cash out of pocket, policy withdrawals, or the death benefit itself. The economics are unforgiving in a long plan with a high advance rate.
- Set the advance rate at or above the applicable federal rate for the month the loan is made, or the below-market loan rules impute interest anyway.
- Decide up front whether interest is paid annually (a cash-flow cost to the executive) or capitalized (a compounding cost to the family).
- Model the advance balance against the projected cash value each year; once the balance passes the cash value, the sponsor's security is thin and the death benefit is being consumed.
- Document the arrangement as a loan from inception — promissory note, collateral assignment, and consistent books and records.
- Plan the exit before the plan starts: a forgiven loan is taxable compensation, and a repaid loan needs a source of repayment.
Split-dollar compared with other executive benefit plans
Split-dollar is one of four common ways to move money to a key executive through life insurance. Each has a different tax fingerprint, which is why the design question is really a question about what the employer wants to deduct, what the executive is willing to report, and who should end up owning the asset.
| Plan | Employer deduction | Executive's taxable income | Employer recovery | Best for |
|---|---|---|---|---|
| Split-dollar, endorsement | No | Table 2001 cost of the net amount at risk | Premiums paid or cash value | Long-tenure executives; large policies the employer wants to control |
| Split-dollar, loan regime | Interest portion may be deductible | Interest at the AFR (typically lower than Table 2001 at younger ages) | Advances plus interest | Shorter funding windows; executive-owned, equity-style designs |
| Section 162 executive bonus | Yes, the full premium | The full premium every year | None | Top-paid executives; simple, flexible, no repayment |
| Section 409A deferred compensation | When benefits are paid | When benefits are paid | Not applicable — an unfunded promise | Retirement-focused retention with a formal plan document |
| Group-term carve-out | Yes, within section 79 limits | Table I imputed income above $50,000 of coverage | Not applicable | Broad-based coverage for a management tier |
How to structure a plan that survives an audit
- Pick the regime deliberately. If the executive needs annual access to cash value and will own the policy, the loan regime fits; if the employer wants the asset on its balance sheet with a defined recovery, use the endorsement method.
- Write the recovery formula into the agreement before the first premium — premiums paid, premiums plus interest, or the greater of premiums or cash value are three very different deals.
- Run the numbers at a realistic horizon, not at the best case. A 20-year projection at an older issue age is where the Table 2001 rate does its damage.
- Value the protection consistently each year, using Table 2001 or the carrier's qualifying published one-year term rates, and report it on the executive's W-2.
- Plan the rollout or termination in writing. A transfer of policy value to the executive is a taxable event, and the executive will want the tax bill modeled before the transfer happens.
- Coordinate with the estate plan. An irrevocable life insurance trust can hold the executive's interest, and a buy-sell or key-person arrangement can run alongside the split-dollar plan without double-counting the same coverage.
Key takeaways
- The executive's annual cost in an endorsement plan is not the premium — it is the Table 2001 rate multiplied by the net amount at risk, taxed at the executive's marginal bracket.
- Table 2001 rates are unisex, published in IRS Notice 2002-8, and climb steeply after 60: $4.15 per $1,000 at 55 versus $33.05 at 75.
- The sponsor's recovery formula is the single biggest driver of what the family actually receives, because the death benefit is paid net of the sponsor's interest.
- The loan regime defers the Table 2001 inclusion but substitutes interest, which can cost far more than the tax it avoids in a long plan.
- Compare every plan against the alternative of the executive owning the policy outright — that comparison is the real benchmark for whether a split-dollar design is worth its complexity.
Frequently Asked Questions
What is a split-dollar life insurance plan?
It is an arrangement in which two parties — typically an employer (the sponsor) and an executive (the benefited party) — share the cost, cash value and death benefit of one permanent life insurance policy under a written agreement. The sponsor advances the premium; the executive's family receives a defined slice of the death benefit; and the sponsor recovers its interest at termination, rollout or death.
How is the executive taxed under the endorsement method?
Each year the executive includes in gross income the cost of the current life insurance protection being provided. That cost equals the net amount at risk (the death benefit in excess of the sponsor's interest) divided by $1,000 and multiplied by the Table 2001 one-year term rate for the executive's attained age. The resulting amount is reported as wages and taxed at ordinary income rates.
What is Table 2001, and why did it replace the P.S. 58 rates?
Table 2001 is the interim table of one-year term premiums published in IRS Notice 2002-8, per $1,000 of life insurance protection, at each attained age. It replaced the P.S. 58 rates from Revenue Ruling 55-747, which were based on 1950s mortality experience and produced inclusion amounts well above what comparable term coverage actually cost.
Is the employer's premium deductible in a split-dollar plan?
Generally no for the endorsement method — the premium is treated as a non-deductible capital outlay because the employer retains an interest in the policy and recovers it. Under the loan regime the advances are loans rather than expenses, though the interest component may be partially deductible as business interest. Either way, deduction is not the reason to adopt a split-dollar design.
What happens at rollout or termination?
At rollout the sponsor's interest is transferred to the executive, usually by replacing the endorsement or releasing the collateral assignment. The value transferred is taxable to the executive under section 83 or section 61, and the policy's future growth is then taxed inside the executive's own policy. At death, the sponsor first recovers its interest and the beneficiary receives the remainder, free of federal income tax under section 101(a).
Can a split-dollar plan cover someone other than a highly compensated executive?
There is no statutory restriction to executives, but the economic and administrative overhead — annual valuation, W-2 reporting, and a formal agreement — limits practical use to owners, key employees and executives with long tenure. For broad-based coverage, a group-term carve-out or section 162 bonus is usually simpler.
Does split-dollar work with term insurance?
Almost always it is built on permanent coverage, because the sponsor needs a cash value to secure its interest and a policy that stays in force for decades. Term insurance has no cash value, so the sponsor's recovery depends entirely on the death benefit being paid while the term is active.
Related Resources
- IRS Notice 2002-8 — Table 2001 one-year term premium rates
- 26 CFR section 1.61-22 — taxation of split-dollar life insurance arrangements
- NAIC consumer resources — policyholder rights and carrier information
- AM Best — financial strength ratings for the carrier behind the policy
- Split-dollar life insurance: how the plans work
- Split-dollar life insurance guide for business owners
- Section 162 executive bonus plan calculator
- Executive deferred compensation (409A) calculator
- Key person life insurance calculator
Run the numbers above with your own plan terms, then compare the result against a straightforward section 162 bonus or an executive-owned policy. If the split-dollar structure cannot beat the simple alternative on cost per dollar of survivor benefit, it is complexity without a payoff.
