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.

  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. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  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. Investing

    Estate Planning for Singles

    Now that singles dominate the population, it's important they understand the essentials of estate planning for indivdiuals.
  6. Retirement

    How Are 401(k) Withdrawals Taxed for Nonresidents?

    As a U.S. nonresident, deciding what to do with your 401(k) after you return home comes down to which tax penalties, if any, you're willing to incur.
  7. Retirement

    Why Are Annuities Important for Retirement?

    Understand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
  8. Retirement

    What Does It Cost to Retire in Belize?

    Find out how much monthly income you need to retire comfortably in Belize, a subtropical paradise with jungle landscapes, white beaches and crystal blue water.
  9. Savings

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
  10. Professionals

    Social Security COLA in 2016? Not Likely

    A cost of living increase for Social Security doesn't look likely in 2016. Here's what retirees should know and what they can do about it.
  1. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  2. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  3. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  4. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  5. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>
  6. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!