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Give Your Retirement Plan a Huge Boost

June 2003
Give Your Retirement Plan a Huge Boost

Imagine a retirement plan that allows you to contribute a $100k, $200k or even $300k per year on a tax deductible basis. Imagine a plan that offers an excellent form of asset protection from lawsuits and suffers no volatility from the stock market.

Such plan is available to highly compensated small business owners who would like to contribute larger amounts toward their retirement. This type of plan is known as a 412(i) Defined Benefit Plan.��� A 412(i) plan is a simplified defined benefit plan which is funded with life insurance and annuities.


These plans have been around since 1974.���As a matter of fact, they were even popular from 1974 to 1986 to the highly compensated business owners, but the tax laws changes during that time made the 412(i) plans less desirable, hence you did not hear much about them. Thanks to the tax act of 2001, pension plans are back! With the repeal of I.R.C.

�415(e), a 412(i) plan may now be funded with sufficient assets to provide a retirement benefit of up to $160,000 annually for the rest of your life.

Asset Protection

As an ERISA defined pension plan, a properly drafted 412(i) plan can also provide an excellent form of asset protection. The most notorious, widely publicized example is the O.J. Simpson case. O.J. Simpson enjoys his daily round of golf in Florida and his $25,000 monthly NFL pension benefit, even in the face of an outstanding $30 million civil judgment returned against him in California holding him responsible for the deaths of Nicole Brown Simpson and Ronald Goldman.

Summary of Benefits and Features.

You can contribute large amounts as much as $300,000/yr

You receive immediate tax deductions.

Your plan assets are creditor-protected.

Your plan benefits are fully guaranteed by a major insurance carrier (guarantees are based on the claims paying ability of the issuing insurance company).

Your C or S Corp, Family Limited Partnership or LLC can adopt the plan.

No plan actuary or PBGC insurance is required.

Your plan is inexpensive to establish and maintain.

The ideal candidate for a 412(i) plan is a self employed business owner. However, If you have other employees, it is also possible to do a "cross-tested" 401(k)/412(i) plan. You would have to contribute a portion for all of your eligible employees, but based upon the age, compensation and length of service of your employees, it is possible to build formulas to skew benefits more towards the owners and key employees.

Although 412(i) plans are not for everyone, but for that small business owner who has steady high income, and would like to contribute more than the traditional retirement plans, which have limits of around $40,000/yr, a 412(i) plan is worth looking into. o

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