Please see 2009 IRS Notice as well as an article on this rule. If a company purchased life insurance on employees or directors after 8/17/06, the company satisfied the notification and annual information reporting requirements. They must report the number of people covered under these policies and the aggregate face value of the policies on IRS Form 8925 each year. Failure to do so and the life policy proceeds lose their status as exempt from tax.
If you have any questions, please contact my colleague, Ryan Losi, CPA at firstname.lastname@example.org.