I know this is not an IRA specific question, but can any one assist with my scenario?

I am 50 and have funds in a Roth account within my 401k plan. My plan permits the purchase of life insurance. I understand that distribution from Roth funds can only occur (without penalty) when the plan has been in place for at least 5 years and I am over the age of 59 1/2.

So, question. If I use Roth funds to pay the premium on a 5-pay life insurance policy with the intent of taking out policy loans later on (while I am still operating my business of course), I am assuming that the distribution of the policy or its fair market value would be non-taxable provided 1) only Roth funds were used to pay the premiums, 2) the Roth account has been open and funded for at least 5 years and 3) when the distribution occurs I am over the age of 59 1/2.

To me, this is no different than if I used Roth funds to invest into mutual funds and took distributions from the plan after 5 years and 59 1/2. Am I missing something?

Thanks.

Sydney