Business Owners

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.

Age	Annuity Only	Maximum Life & Annuity
40	$77,405	$94,674
45	$108,619	$135,183
50	$166,552	$213,905
55	$215,941	$296,867

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. Life Solutions 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

Note: The contributions above are based upon maximums allowed under IRC Section 412(e)(3) for 2009 and the guaranteed annuity purchase rates, the guaranteed insurance cash values, and the guaranteed annuity accumulation rates of a highly rated insurance company’s 412(e)(3) qualified life and annuity products. Other agents and other companies will have different results. The numbers also assume the business owner at the selected ages has earnings of at least $195,000 and the normal retirement age is 62.

The benefits provided are dependent upon minimum premium requirements and the claims paying ability of the insurance company.


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