Internal Revenue Service, Treasury § 1.79–4T minimum or maximum contribution rate by the employer or the employees.

(Secs. 79(c) and 7805 of the Internal Revenue
Code of 1954 (78 Stat. 36, 26 U.S.C. 79(c); 68A
Stat. 917, 28 U.S.C. 7805))
[T.D. 6888, 31 FR 9203, July 6, 1966, as amended
by T.D. 7623, 44 FR 28800, May 17, 1979;
T.D. 7924, 48 FR 54595, Dec. 6, 1983; T.D. 8273,
54 FR 47979, Nov. 20, 1989; T.D. 8424, 57 FR
33635, July 30, 1992; T.D. 8821, 64 FR 29790,
June 3, 1999]
§ 1.79–4T Questions and answers relating
to the nondiscrimination requirements
for group-term life insurance
(temporary).
Q–1: When does section 79, as amended
by the Tax Reform Act of 1984, become
effective?
A–1: (a) Generally, section 79, as
amended, applies to taxable years (of
the employee receiving insurance coverage)
beginning after December 31,
1983. There are, however, several exceptions
to this effective date where there
is coverage under a group-term life insurance
plan of the employer that was
in existence on January 1, 1984, or a
comparable successor to such a plan
maintained by the employer or a successor
employer.
(b) First, the new rules of section 79
(b) and (e), that require the inclusion
in income of a retired employee of
amounts attributable to the cost of
group-term life insurance in excess of
$50,000 and that include former employees
within the definition of the term
‘‘employee,’’ will not apply to any employee
who retired from employment
on or before January 1, 1984.
(c) Second, in the case of an individual
who retires after January 1,
1984, and before January 1, 1987, the
new rules of section 79 (b) and (e) do
not apply if (1) the individual attained
age 55 on or before January 1, 1984, and
(2) the plan was maintained by the
same employer who employed the individual
during 1983, or by a successor
employer.
(d) Third, in the case of an individual
who retires after December 31, 1986, the
new rules of section 79 (b) and (e) do
not apply if (1) the individual attained
age 55 on or before January 1, 1984, (2)
the plan was maintained by the same
employer who employed the individual
during 1983, or by a successor employer,
and (3) the plan is not, after December
31, 1986, a discriminatory
group-term life insurance plan (not
taking into account any group-term
life insurance coverage provided to employees
who retired before January 1,
1987).
(e) For purposes of determining
whether a plan is, after December 31,
1986, a discriminatory group-term life
insurance plan, there shall be ignored
any insurance coverage provided pursuant
to a state law requirement that an
insurer continue to provide insurance
coverage for a period of time not in excess
of two months following the termination
of a policy.
Q–2: What is meant by a ‘‘group-term
life insurance plan of the employer
that was in existence on January 1,
1984’’?
A–2: A group-term life insurance plan
of the employer was in existence on
January 1, 1984, only if the group policy
or policies providing group-term life
insurance benefits under the plan were
executed on or before January 1, 1984,
and were not terminated prior to such
date. The applicability of section 79, as
amended, to an employee will not be
affected by the transfer of the employee
between employers treated as a
single employer under section 79(d)(7)
if the employee continues, after the
transfer, to be provided with groupterm
life insurance benefits under a
plan that is comparable (determined
under the principles set forth in Q&A 3)
to the plan provided by the former employer.
Q–3: When is a plan of group-term life
insurance a ‘‘comparable successor’’ to
another such plan?
A–3: A plan of group-term life insurance
will be a comparable successor to
another plan of group-term life insurance
(the first plan) only if the plan
does not differ from the first plan in
any significant aspect with respect to
individuals who are potentially eligible
for benefits provided under the grandfather
provisions in Q&A 1. These individuals
consist of those persons who
are covered under a plan of group-term
life insurance of the employer that was
in existence on January 1, 1984, or a
comparable successor to such a plan
maintained by the employer or a successor
employer, and who either retired

Part of the IRS memo on group term as it relates to section 79 which you should read before you proceed.