Section 79 Plans bear some similarities to other captive insurance plans or abusive tax shelters pitched to small business owners that were the target of IRS audits like 419 Plans and 412(i) Plans.

If you purchased insurance from Pacific Life you may have been sold a Section 79 plan that might be deemed abusive.

Contact Lance Wallach today to protect yourself.

Lance Wallach expert witness

Expert Witness Services

Section 79 Help

What is a Section 79 plan and How Do You Avoid Fines?

So what is a Section 79 plan? It is a group term-life insurance policy purchased by business owners for their employees. Often small-business owners are told that they’re allowed to take a tax deduction through their businesses in order to purchase life insurance. That sounds pretty good, doesn’t it? When you break down the math and the sales pitch, however, it just doesn’t make sense.

Agents try to sell Section 79 plans for two simple reasons:

Many small business clients will buy any plan that is "deductible" because they hate paying income taxes.
Insurance advisors want to sell life insurance.

This brings up an interesting issue: If the plan is marginal from a wealth-building standpoint, then why are agents selling it? Again, there are two reasons:

Most advisors have not broken down the math so they can come to a correct conclusion, which is that the plans are not worth implementing from a pure financial standpoint.
Some advisors know the plan is marginal from a financial standpoint and don't care because they know they can still sell it to business owners who are looking for deductions. The IRS considers them abusive, and will audit them.

Expert Witness Services

Section 79 Help

Many small business clients will buy any plan that is "deductible" because they hate paying income taxes.

Insurance advisors want to sell life insurance.

This brings up an interesting issue: If the plan is marginal from a wealth-building standpoint, then why are agents selling it? Again, there are two reasons:

Most advisors have not broken down the math so they can come to a correct conclusion, which is that the plans are not worth implementing from a pure financial standpoint.

Some advisors know the plan is marginal from a financial standpoint and don't care because they know they can still sell it to business owners who are looking for deductions. The IRS considers them abusive, and will audit them.​

Some advisors know the plan is marginal from a financial standpoint and don't care because they know they can still sell it to business owners who are looking for deductions. The IRS considers them abusive, and will audit them.