Supercharge Your Retirement With A 412(e)(3) Defined Benefit Plan

Don't overlook an opportunity to make the most of your retirement contribution potential. An individually designed 412(e)(3) Defined Benefit Plan is fully guaranteed retirement vehicle that is exempt from the funding limitations of other business retirement plans such as SEP's and 401(k) plans. Contributions are fully deductible to your business and are also not subject to FICA taxes if you are incorporated. Contributions can also help reduce your AGI and may thereby help you avoid the 3.8% Investment Income Tax.

​Beyond corporations, partnerships and sole proprietorships are also eligible to sponsor a plan, with contributions reported as deductions on your Form 1040 or K-1 IRS form. You can also deduct one-half of the SE Tax (FICA) calculated on your full net earnings from self-employment before 412(e)(3) plan deductions are applied. These smaller-employee groups are ideal candidates for such plans since non-discrimination participation rules do apply, and all qualified employees must be included in every plan. Participants age 45 and older can contribute even more to these plans, with annual contributions far outstripping 401(k) or other plan limits. This represents the ultimate retirement plan catch-up.

 412(e)(3) plans can further incorporate life insurance to benefit you not only through largely tax-free Death Benefits but also via tax-free Terminal Illness Benefits or Chronic Illness Benefits (if you need such assistance either before or after retiring). While these defined benefit plans feature no investment risk and provide the guarantee of a well-funded retirement, it's also comforting to know that you and your family can receive unique tax breaks on any Death, Terminal, or Chronic Illness Benefits that you may qualify for at any point in the life of your policy.

​​If you already contribute to a 401(k) and/or Profit-Sharing plan, contributing the maximum amount to a 412(e)(3) plan may require you to reduce your Profit Sharing contribution to a max 6% of compensation. If you contribute to a SEP IRA and want to open a 412(e)(3) plan, the same 6% restriction may apply, depending on your total contributions to both plans. In these two circumstances, it is important to recall that 412(e)(3) contributions, like other employer-funded contributions, are considered among the most efficient since they are not subject to FICA, potentially saving you 15.3% in taxes right off the bat. You may also want to use the non-correlated, fully guaranteed nature of your 412(e)(3) plan to provide a "floor" to the growth-based equity investments in your 401(k) or SEP. Combining these two plans can not only provide a significant boost to your retirement deferrals, this strategy can also result in an overall improvement in your returns from your retirement portfolio, particularly in times when severe market risk negatively impacts your account values as you approach or begin retirement.​

​​​At retirement, plan participants have a number of options for how they will manage their funds, including a single or joint life-only or period-certain annuity, rolling the funds into an IRA, or any combination of the above. Life Insurance policies held in the plan can be purchased from the plan either with plan assets or with outside funds. You can also choose to have the plan Trustee cancel your policy and add the cash value to your available funds. 412(e)(3) plans not only allow for the highest contributions of any retirement plan, they are also among the most flexible, creative, and beneficial when it comes time for distributions. Please inquire via the form found below.Don't overlook an opportunity to make the most of your retirement contribution potential. An individually designed 412(e)(3) Defined Benefit Plan is fully guaranteed retirement vehicle that is exempt from the funding limitations of other business retirement plans such as SEP's and 401(k) plans. Contributions are fully deductible to your business and are also not subject to FICA taxes if you are incorporated. Contributions can also help reduce your AGI and may thereby help you avoid the 3.8% Investment Income Tax.

​Beyond corporations, partnerships and sole proprietorships are also eligible to sponsor a plan, with contributions reported as deductions on your Form 1040 or K-1 IRS form. You can also deduct one-half of the SE Tax (FICA) calculated on your full net earnings from self-employment before 412(e)(3) plan deductions are applied. These smaller-employee groups are ideal candidates for such plans since non-discrimination participation rules do apply, and all qualified employees must be included in every plan. Participants age 45 and older can contribute even more to these plans, with annual contributions far outstripping 401(k) or other plan limits. This represents the ultimate retirement plan catch-up.

 412(e)(3) plans can further incorporate life insurance to benefit you not only through largely tax-free Death Benefits but also via tax-free Terminal Illness Benefits or Chronic Illness Benefits (if you need such assistance either before or after retiring). While these defined benefit plans feature no investment risk and provide the guarantee of a well-funded retirement, it's also comforting to know that you and your family can receive unique tax breaks on any Death, Terminal, or Chronic Illness Benefits that you may qualify for at any point in the life of your policy.

​​If you already contribute to a 401(k) and/or Profit-Sharing plan, contributing the maximum amount to a 412(e)(3) plan may require you to reduce your Profit Sharing contribution to a max 6% of compensation. If you contribute to a SEP IRA and want to open a 412(e)(3) plan, the same 6% restriction may apply, depending on your total contributions to both plans. In these two circumstances, it is important to recall that 412(e)(3) contributions, like other employer-funded contributions, are considered among the most efficient since they are not subject to FICA, potentially saving you 15.3% in taxes right off the bat. You may also want to use the non-correlated, fully guaranteed nature of your 412(e)(3) plan to provide a "floor" to the growth-based equity investments in your 401(k) or SEP. Combining these two plans can not only provide a significant boost to your retirement deferrals, this strategy can also result in an overall improvement in your returns from your retirement portfolio, particularly in times when severe market risk negatively impacts your account values as you approach or begin retirement.​

​​​At retirement, plan participants have a number of options for how they will manage their funds, including a single or joint life-only or period-certain annuity, rolling the funds into an IRA, or any combination of the above. Life Insurance policies held in the plan can be purchased from the plan either with plan assets or with outside funds. You can also choose to have the plan Trustee cancel your policy and add the cash value to your available funds. 412(e)(3) plans not only allow for the highest contributions of any retirement plan, they are also among the most flexible, creative, and beneficial when it comes time for distributions. Please inquire via the form found below.