I know that premiums paid for a whole life policy within a DC plan cannot exceed 50% of the contributions to the participant. Is this rule applied on a cumulative basis (contributions vs. premiums since plans inception) or a yearly basis. My client generally makes the maximum contribution, but this year only paid premiums.

It's tested on a cumulative basis.

Incidentally, the 50% is reduced to 25% if the insurance is either term or universal life.

Hope this is of benefit to you.

Isn't it rather that aged (2 year old) PS money is available to be used without limit?

Only a slight difference, but it is different.

Earl, you are correct, but this "two year rule" applies only to profit sharing plans. It is not applicable to other types of defined contribution plans.

Thanks for the clarification!