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412 (i) PLANS
"We make LIFE easy!"
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A 412 (i) PLAN IS A VARIATION OF A DEFINED
BENEFIT PENSION PLAN, THE FUNDING REQUIREMENTS
OF WHICH FALL UNDER IRC SECTION 412(I).
THE 412(i) PLAN MUST BE FUNDED SOLELY BY
GROUP OR INDIVIDUAL LIFE INSURANCE &
ANNUITY POLICIES (OF THE SAME SERIES, MORTALITY
TABLES, AND ASSUMPTIONS) AND ISSUED BY AN
INSURANCE COMPANY.
BECAUSE THE GUARANTEES OF INSURANCE CONTRACTS
ARE RELATIVELY LOW, IT ALLOWS FOR CONTRIBUTIONS
THAT MAXIMIZE THE CURRENT TAX DEDUCTION.
THE POLICIES MUST PROVIDE FOR LEVEL PREMIUMS,
MUST NEVER LAPSE DUE TO NON-PAYMENT OF PREMIUMS,
MUST NOT OFFER LOANS-EVEN APL'S MUST BE REPAID
BEFORE PLAN YEAR END, OR RIGHTS DUE TO SECURITY
INTEREST.
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THIS TYPE OF QUALIFIED PLAN, REFERRED TO
AS A "FULLY INSURED" PLAN PROVIDES
SIGNIFICANT BENEFITS IN A SIMPLE AND SECURE
ARRANGEMENT.
THERE CAN BE NO OVER FUNDING OR UNDERFUNDING-
AS THE CONTRIBUTIONS ARE BASED SOLELY ON
THE GUARANTEED PROVISION OF THE LEVEL PREMIUM
CONTRACTS.
MUCH OF THE ADMINISTRATION IS SIMPLIFIED
AS COMPARED TO OTHER TYPES OF QUALIFIED PLANS.
THIS TYPE OF PLAN IS NOT THE IDEAL PLAN FOR
EVERY SITUATION BUT WORKS WELL IN A BUSINESS
WHERE THERE ARE LESS THAN FIVE EMPLOYEES,
THE OWNER IS AT LEAST 45 YEARS OLD AND A
FEW YEARS OLDER THAN THE OTHER EMPLOYEES,
AND IS SEEKING VERY LARGE DEDUCTIONS THROUGH
VERY LARGE CONTRIBUTIONS.
WHILE LIFE INSURANCE IS
NOT REQUIRED, IT
CAN PROVIDE THE BENEFITS
OF LIFE INSURANCE
ON A PRE-TAX BASIS. |
CONCEPTS INDEX |
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