412(e)(3) Plan

​A 412(e)(3) Fully Insured Defined Benefit Plan is a retirement plan that provides guaranteed retirement benefits to the owners and employees of a company, provided annual premium contributions have been funded.


The plan is funded solely with life insurance and annuities, or annuity-only contracts, offering minimum guaranteed interest rates.

Key Features

  • Tax-deferred investment
  • Flexibility in plan design
  • Contributions may be deductible by employer
  • Salary deferrals reduce employee’s taxable income

 How it Works

The plan trustee purchases annuities or a combination of annuities and life insurance for each participant in the plan.  Premium payments are made to the insurance contracts each year for purposes of funding the future retirement benefit for each participant.

  • The plan must be level funded and must begin when the participants are eligible and must end no later than the normal retirement date.  No loans are allowed.

Sample Max Contribution Comparison Scenario
Scenario:  Business owner age 55;  no employees;  retirement age 65;  compensation $280,000;  first year contribution

Plan SolutionMaximum Contribution​
​401(k) Plan$19,000
 $6,000 catch-up
Profit Sharing $56,000
Traditional Defined Benefit $236,042
412(e)(3) Full Insured$361,641

Contributions are for illustration purposes only, and actual contributions may vary.  Contributions are calculated bases upon individual census data.  Values as of 01/01/2019.