Which plan allows an employer to provide funds for an employee to purchase a life insurance policy while allowing the employee to choose the beneficiary?

The split dollar plan is a unique arrangement where an employer and employee share the costs and benefits of a life insurance policy. In this plan, the employer typically provides funds to purchase the policy, while the employee has the choice of selecting the beneficiary. This structure allows both parties to partake in the benefits of the policy: the employer might seek to protect their investment in the employee, while the employee can designate someone close to them as the beneficiary, ensuring that their loved ones receive the benefits upon their death.

This flexibility in beneficiary choice is a distinctive feature of the split dollar plan that supports the employee's personal preferences regarding life insurance coverage, unlike traditional group life insurance where coverage and beneficiary designations are typically predetermined and limited. Whole life and universal life plans are individual policies that may not involve employer contributions in the same way, focusing more on personal accumulation of value rather than shared financial responsibility.