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target premium, which was the cost of the life insurance, and
(2) the excess premium, which was an amount placed into a side
fund for payment of DWB's. In the cases where second and
subsequent year contributions were made by an employer, the
contributions were usually made to pay a renewal premium on the
life insurance or to increase the side fund. Contributions were
also sometimes made in years subsequent to the first year to
purchase additional insurance for newly eligible employees or to
increase the amount of insurance for employees with salary
changes so that the plan remained within the terms of the
Adoption Agreement and the provisions of the Code that were
believed related thereto. If the employer failed to make the
required contributions to keep the policy in force, Prime was
required to make these contributions from assets allocable to the
employer's Employee Group.
Universal life policies offer a policy owner certain options
regarding the cash surrender value of the policy. Under one
option, the policy's cash surrender value is included in the face
amount paid to the beneficiary upon the insured's death. Under a
second option, the carrier pays both the face amount and cash
surrender value to the beneficiary upon the insured's death.
Under the Trust Agreement, the Trust had to elect the second
option for each universal life policy that it acquired. When the
insured died, the carrier paid the beneficiary the policy's face
amount, thus discharging the Prime Plan's obligation to pay the
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