Business Owners

A 412(e)(3) plan enjoys certain advantages over the traditional defined benefit plan and is worth exploring if you are the owner of a small business.

What Requirements Must Be Met To Qualify As A 412(e)(3) Insurance Contract Plan?

The major requirements under section 412(e)(3) of the Internal Revenue Code are:

  • The plan must be funded exclusively with annuity products, or a combination of life insurance and annuity products, issued by an insurance company.
  • The benefits provided each individual must be equal to the values provided in the contracts and guaranteed by the insurance carrier.
  • Life insurance dividends and excess annuity interest must be used to reduce the following year’s plan contribution.
  • No policy loans are allowed under the contracts.

How Much Can The Initial Deductible Contribution To A 412(e)(3) Defined Benefit Plan Be?

Below is an illustration of the maximum first year contribution created by using a highly rated insurance company’s products at selected ages.


Annuity Only

Maximum Life & Annuity













If your goal is a large deduction for your business and a secure retirement benefit for yourself, the special characteristics of the 412(e)(3) defined benefit plan are worth exploring. We would be happy to provide you with a free look at a 412(e)(3) plan for your specific business.

A defined benefit pension plan is a significant commitment, which is why you should consult with an Chartered Financial Consultant.

For a FREE initial consultation, call today: (800) 680-5596 or click here.

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