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A 401k or profit sharing plan can purchase disability insurance in an amount equal to a plan participant's annual contribution.

The insurance policy is owned by the trust and premiums are paid from trust assets without imputed income to the plan participant.

When the employee becomes disabled the insurance benefit is paid to the 401k trust and then allocated directly to the disabled participant's account.

Premiums can be paid from one or more of the following:

• The participant's account balance
• The trust as an administrative expense
• The employer's matching or profit sharing contribution
• An additional employer contribution
• Plan forfeitures

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