Revenue Procedure 2008-42 is IRS guidance that provides safe-harbor rules and procedural details for applying the defective life insurance policy correction program described in Revenue Ruling 2005-25. It outlines how taxpayers and insurers can correct certain noncompliant life insurance contracts that were intended to meet the definition of life insurance under Section 7702 but failed due to administrative errors or incorrect assumptions. The revenue procedure details required corrective actions, documentation, and timeframes, including premium adjustments and policy modifications. By following Revenue Procedure 2008-42, companies and policyowners can remediate defects and preserve intended tax treatment without triggering adverse income recognition.

In advanced tax and product administration circles, Revenue Procedure 2008-42 is referenced when reviewing older blocks of policies for compliance with Section 7702 and addressing discovered errors. Carriers may coordinate with tax counsel and actuaries to determine whether policies fit within the safe harbor and how to implement corrective steps. Advisors are rarely involved directly, but they may hear about corrective programs that adjust policy values or premiums to maintain tax status. Understanding the existence of Revenue Procedure 2008-42 helps explain how insurers manage technical tax compliance issues behind the scenes to protect policyowners.