Glossary

Section 101(j) notice and consent

Federal tax rules requiring employers to notify employees and get written consent before insuring them, or lose most of the tax-free death benefit.

Also called: 101(j), employer-owned life insurance rules, EOLI notice and consent, Form 8925

Internal Revenue Code Section 101(j), added by the Pension Protection Act of 2006, governs employer-owned life insurance: policies a business owns on an employee's life with the business as beneficiary. For contracts issued after August 17, 2006, the death benefit is taxable to the employer above the premiums and other amounts it paid, unless the notice and consent requirements are met and an exception applies.

Before the policy is issued, the employee must be told in writing that the employer intends to insure them and the maximum face amount, must consent in writing (including to coverage continuing after employment ends), and must be told the employer will be the beneficiary. The proceeds then stay tax-free if, for example, the insured was an employee within 12 months before death, was a director or highly compensated employee when the policy was issued, or the proceeds go to the insured's family or are used to buy their ownership interest. Employers report these policies annually on IRS Form 8925.

Hypothetically, a company that buys a $2 million key person insurance policy without a signed consent could owe income tax on most of the payout. The IRS allows only limited relief for inadvertent errors, so the forms belong in the application packet. See key person life insurance and corporate- and bank-owned life insurance.

Last reviewed October 4, 2026

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Related terms

Corporate-owned life insurance (COLI) Life insurance a business buys on its employees or executives, owns and is the beneficiary of, often to fund benefits or offset the loss of key people. Key person insurance A policy a business buys on an owner or essential employee, naming itself beneficiary, to cover losses and replacement costs if that person dies. Bank-owned life insurance (BOLI) Permanent life insurance a bank buys on its employees, owns and names itself beneficiary of, mainly to offset the cost of employee benefits. Buy-sell agreement A contract among business owners that sets who buys a departing or deceased owner's share and at what price, often funded with life insurance. Split-dollar arrangement An agreement in which two parties, often an employer and an executive, share the premiums, cash value and death benefit of a permanent life policy.

Related guides

Corporate- and bank-owned life insurance (COLI and BOLI) What COLI and BOLI are, why employers buy them, the notice-and-consent rule (IRC 101(j), Form 8925), IRC 264 interest limits, and bank regulator oversight. Life insurance in nonqualified deferred compensation How employers use company-owned life insurance to informally fund nonqualified deferred compensation, with IRC 409A, 101(j) and 264 rules and creditor risks. Insurable interest: who can buy life insurance on whom Insurable interest is the family or financial tie that lets you insure someone else's life. Who qualifies, when it must exist, and the consent rule. Key person life insurance How key person life insurance works: who qualifies, how to size it, who owns it, and the tax rules (IRC 101(j), Form 8925) that apply to company-owned policies. Split-dollar life insurance How split-dollar life insurance works, the two tax regimes under Treas. Reg. 1.61-22 and 1.7872-15, and where it is used in employer and family planning.