412(i) Plan

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.

BREAKING DOWN '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. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
  3. Roth IRA

    An individual retirement plan that bears many similarities to ...
  4. Roth 401(k)

    An employer-sponsored investment savings account that is funded ...
  5. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  6. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
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. 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.
  3. 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.
  4. 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.
  5. Retirement

    Is Vanguard Right for Your Retirement?

    If you’re thinking about placing your retirement assets with Vanguard, here’s what you need to know.
  6. Retirement

    The Best Robo-Advisors for Beginner Investors

    There are a handful of robo-advisors that may be a good fit if you're just starting out. Here's a peek at one with no fees and no minimum investment.
  7. Investing Basics

    Why the Fiduciary Rule is Good for All Investors

    The new fiduciary standard should help lower what middle- and lower-income investors pay, on average, to brokers for retirement planning advice.
  8. Retirement

    When a 401(k) Hardship Withdrawal Makes Sense

    If you've exhausted all other avenues, there are ways to withdraw funds before age 59½ – sometimes without the 10% penalty that's usually due.
  9. Products and Investments

    Why ETFs Will Eventually Trump Mutual Funds

    Exchange-traded funds are growing rapidly in popularity and may well overtake their traditional open-ended cousins at some point. Here's why.
  10. Financial Advisor Technology

    This Annuity Robo Wants to Transform the Market

    Annuities picked and sold without the intervention of an insurance agent? Here's a website that's trying to be the robo-advisor of the annuity world.
RELATED FAQS
  1. If I am no longer employed, can I roll over a 403(b) plan into an IRA?

    Now that you are no longer working with the (former) employer that established your 403(b) account, you may roll your 403 ... Read Answer >>
  2. Can I return funds to my Roth IRA after I have taken it as a distribution?

    Yes. You can roll over the amount to the Roth IRA, or another of your Roth IRAs (excluding inherited Roth IRAs), provided ... Read Answer >>
  3. I am starting a limited liability company (LLC). I will be the sole member. Can I ...

    In a word, yes. A limited liability company (LLC) is eligible to establish a simplified employee pension (SEP). Keep in mind ... Read Answer >>
  4. How does a defined benefit pension plan differ from a defined contribution plan?

    Learn the differences between defined benefit plans and defined contribution plans when reviewing employer-sponsored qualified ... Read Answer >>
  5. Can a spouse who is not named as a beneficiary receive assets from an IRA?

    It depends.Generally speaking, the designation of beneficiary form dictates who receives the assets from the individual retirement ... Read Answer >>
  6. How do my siblings and I receive inherited pension benefit payments from our deceased ...

    Generally, the provisions of the plan document determine the distribution options available to beneficiaries of retirement ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center