412i RETIREMENT PLANS
What is a 412(i) Plan?
A 412(i) is a defined benefit plan that uses a life insurance annuity table and assumptions. This plan provides a substantially higher tax deduction with a much simpler method of calculating contributions and benefits by using a different actuarial funding strategy.
How long have 412i Plans been around?
412(i) Plans have been around for more than 50 years.
Why have 412i Plans become so popular?
412(i) plans guarantee a return of four percent (in some cases three percent). When interest were 8-14% or more, a four percent product was not very exciting. However, today's low interest climate, coupled with market disenchantment, lends strong appeal to a guaranteed investment return. Further, the tax-deductible contribution for one person can be as high as $350,000 or up to 100% of wages. This can more than make up for the lower returns due to having to use low risk investments. We work with the clients CPA to evaluate if and when this is an appropriate Retirement plan for the individual.
