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412 ( i ) Plans
As a business owner you have an array of retirement planning options to choose from, a 412(i) plan can be a powerful retirement planning tool because of its many benefits.
Qualified Retirement Plans including 412 i plans are very useful. Depending on the size of your business and plan objectives, We offer products and services for tax qualified retirement plans, such as 401(k), profit sharing, and 412(i) plans. Specifically, a 412(i) plan is a qualified defined benefit pension plan, funded exclusively with fixed annuities or with a combination of fixed annuities and level premium permanent life insurance. A 412(i) plan may provide larger federal income tax deductions than other types of plans and are generally used by businesses where the owners are above age 50.
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RETIREMENT PLANNING
Retirement planning in today’s market presents many challenges for business owners. The values of assets in 401(k) plans, profit sharing plans and stock market investments may have significantly declined. Even with recent value changes in the U.S. equity markets, many investors worry because the value of their “nest egg” is not what they thought it would be.
A SOLUTION
When it comes to planning for a secure future as a successful business owner, you are probably concerned with:
■ Maximizing retirement contributions
■ Minimizing current income taxes
■ Having life insurance protection
■ Offering guaranteed retirement benefits for yourself and your employees
A 412(i)* plan may be appropriate for your business if:
■ It is a sole proprietorship, partnership, LLC, S Corporation or C Corporation
■ If you are a professional or a small business owner
■ You or your key employees are over 50 years old
■ You have ten or fewer employees
■ You and your employees are in your peak earning and tax-paying years
As a business owner you must meet the following requirements to qualify for a 412(i) plan:
■ The plan must have a Third Party Administrator (TPA) that will design and administer the plan and make sure that it meets all of the applicable requirements. (The plan itself is generally established by using a trust approved by the IRS.)
■ The plan must be funded exclusively with individual fixed annuities or a combination of fixed annuities and permanent whole life insurance.
■ The life insurance and fixed annuity contracts must provide for level annual premium payments and guaranteed values.
■ Benefits provided by the plan must be equal to the benefits provided under the contracts and guaranteed by an insurance company.
THE NEED
Business owners have an array of retirement planning options. However, determining which one offers the  opportunity you need to help achieve your retirement goals in a cost-effective and easily administered way can be a challenge. Traditional qualified retirement plans are funded with tax deductible business dollars, but may not allow you, the business owner, to contribute as much as you would like. Non-qualified retirement plans, unlike 412(i) plans, use after-tax dollars, and offer virtually unlimited funding, but does not offer tax deductions.
If you are looking for the ability to contribute more pre-tax dollars than is possible with traditional retirement plans, a 412(i) plan may be a great option.
A SOLUTION
We offer a suite of products and services to implement your plan.
■ Choices in administration – When using our products in a 412(i) plan, you may use your own TPA or, if
you do not have a relationship with a TPA, we can coordinate the process for you. We have conveniently packaged the work flows and arrangements to streamline the administration process that occurs between the carrier, the producer and your TPA.
■ Choices in life insurance products – We offer a broad spectrum of traditional whole life insurance and fixed annuity products that can fit your 412(i) planning needs.1
■ Consistently high financial strength ratings – Since 412(i) defined benefit plans are guaranteed, be sure they are backed by a company that is extremely strong like a mutual company that has consistently maintained strong financial ratings.
THE BENEFIT
A 412(i) plan can be a powerful retirement planning tool because of the many benefits it offers:
■ Current income tax deductions for the employer
■ Valuable life insurance protection
■ Dividends2 can be used to reduce future contributions
■ The participant may elect to take over the permanent life insurance policy upon retirement
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WHOLE LIFE |
HIGH EARLY CASH VALUE (HECV) HECV |
LIFE PAID UP AT AGE 65 |
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Level premium whole life insurance that provides a guaranteed level face amount |
Level premium whole life insurance providing a lifetime, level, guaranteed face amount |
Level premium whole life insurance providing a level, guaranteed face amount |
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Premiums are payable to age 100 |
Premiums are payable to age 85 |
Premiums are payable to age 65 |
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Provides for cash accumulation and payment of dividends 2 |
Provides cash accumulation and payment of dividends 2 |
Provides cash accumulation and payment of dividends 2 |
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Waiver of Premium Rider 3 (WP) provides premium payment protection in the event that the participant becomes totally disabled as described in the rider |
Waiver of Premium Rider 3 (WP) provides premium payment protection in the event that the participant becomes totally disabled as described in the rider |
Waiver of Premium Rider 3 (WP) provides premium payment protection in the event that the participant becomes totally disabled as described in the rider |
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Offers guaranteed cash value of 90% of premiums paid into the policy at the end of the first year 4 Cash value increases during years 2-5 equal to premiums paid Cash value at the end of five years equal to at least 98 percent of premiums paid |
Policy is paid up by the age of 65 without additional premium payments |
*412(i) is being renumbered by the Pension Protection Act of 2006, 1 A 412(i) plan must be funded exclusively with individual insurance products, either fixed annuities or a combination of fixed annuities and life insurance., 2 Dividends are not guaranteed. 3 Waiver of Premium rider may be available at an additional cost. 4 Excluding annual $50 policy fee, any classified premium and costs for optional coverages.
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