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