412(i) Plan

AAA

DEFINITION of '412(i) Plan'

A defined-benefit pension plan designed for small business owners in the United States. This is a tax-qualified benefit plan, so any amount that the owner contributes to the plan becomes available immediately as a tax deduction to the company. The plan must be funded solely by guaranteed annuities, or a combination of annuities and life insurance.

INVESTOPEDIA EXPLAINS '412(i) Plan'

These plans have been developed for small business owners who find it difficult to invest in their company, while also trying to save for retirement. This plan is unique in that it provides fully guaranteed retirement benefits, it must be funded by an insurance company and it provides the largest tax-deduction possible.

Due to the large premiums that must be paid each year, this plan may not be ideal for all small business owners. This plan would tend to benefit small businesses that are established and quite profitable.

RELATED TERMS
  1. 401(a) Plan

    A money-purchase retirement savings plan that is set up by an ...
  2. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  3. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  4. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
Related Articles
  1. Retirement

    An Introduction To The Roth 401(k)

    The money that you earn today is taxed today, making tax-free retirement withdrawals a reality.
  2. Retirement

    6 Ways To Maximize The Value Of Your 401(k)

    From matching employer contributions to proper asset allocation, we'll tell you how to get the most out of your plan.
  3. Retirement

    A Closer Look At The Roth 401(k)

    Learn about the benefits and drawbacks of this new investment account and see if it's right for you.
  4. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  5. Professionals

    Retirement Bliss? Not So fast: When Savings Lag

    Most people aren't saving enough for retirement. Here are some tips savers and financial advisors can use to change that.
  6. Professionals

    Monthly Pension Or Lump-Sum: Which Is Better?

    When a client is faced with the choice of a monthly pension or a lump-sum payment, which one is better? Here's a quick guide on how to decide.
  7. Professionals

    Financial Planning Tips And Resources For Veterans

    Veterans or all kinds have special needs when it comes to financial planning. Here are some tips as well as a comprehensive list of online resources.
  8. Professionals

    Where You Clients Should Retire (For Tax Reasons)

    Are your clients asking where they should retire? That's a tough call, but here we cover the tax angle.
  9. Professionals

    Should Your Retiring Clients Pay Off A Mortgage?

    Should your retiring clients pay off their mortgages? It's more complicated than 'yes' or 'no,' so here's a quick guide.
  10. Professionals

    Why Retirement Advice Is Better But Still Lacking

    With a multitude of resources available to savers and their advisers, you'd think that retirement planning would be a breeze. Here's why you'd be wrong.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center