SB 540 - Split-dollar Life Insurance Policies for Nonprofits

Senate Bill 540 allows a nonprofit to offer their officers a loan regime split-dollar life insurance policy that is secured by either its death benefit or cash surrender value, or both. Since the early 2000s, Federal guidelines have allowed these types of split-dollar loans to be secured by either the death benefit, the cash surrender value, or both. SB 540 would merely mirror the federal guidelines in California.

Split-dollar loans can be a beneficial tool for employers to recruit or retain key officers when additional cash compensation is not an option. SB 540 makes this arrangement more beneficial to the officer while keeping it cost-neutral to the organization and providing a means of complete cost recovery.