412(E) Defined Benefits Plan

High Tax Deductible Contributions – Guaranteed Benefits* A unique qualified plan for today’s small business.

Successful business clients can benefit from a Fully Insured 412(e)(3) Defined Benefit plan1 which offers:


  • Guaranteed* retirement benefits
  • Does not participate in market movements
  • A deduction that could possibly be larger than other qualified plans
  • Contributions potentially greater than $61,000

A Fully Insured 412(e)(3) Defined Benefit plan is a defined benefit retirement plan, the funding requirements of which fall under IRC Section 412(e)(3). If a plan meets the requirements of this subsection, it is exempt from the complex funding rules of Section 412 of the Internal Revenue Code and applicable to all other defined benefit plans.

Fully Insured 412(e)(3) Defined Benefit plans have been around for over 60 years and may be an attractive solution for business clients. They offer large current tax-deductible contributions and guaranteed* retirement benefits, all of which can only be provided by a life insurance company.

Requirements

In order for a plan to qualify under Section 412(e)(3), certain requirements must be met. Although this subsection allows an exception from the complex funding requirements found in Section 412, a special set of conditions must also be satisfied as follows:

  • The plan must be funded solely by individual or group whole life insurance and fixed annuity contracts that are part of the same series, and that include the same mortality tables and rate assumptions for all participants.
  • These contracts must fund benefits using level premiums for all benefits. Payments begin when a participant enters the plan and may extend no later than the retirement date specified under the plan.
  • The plan benefits must be provided only by these contracts and be guaranteed* by an insurance company. In effect, the plan is fully insured.
  • Participants may not take loans.

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