412(I) PENSION PLANS: The Time Is Now!
The big case. Every agent and producer is looking for a way to consistently market big premium cases. Historically, the producer who works in the business market has the best chance of finding that "whale of a case." The reasons are obvious. The business clients generate big income, and with big income comes big taxes. Any successful business owner understands that the way to maximize his profits is to lower his taxes. Or, use money that would go to Uncle Sam and provide a benefit for himself and his employees sometime in the future. This type of tax planning is a perfect entry into the pension-planning arena. And with the current volatility in the market, the often under-utilized 412(i) fully insured qualified plan is making an impact.
So what is a 412(i) pension plan? In simple terms a 412(i) is a Defined Benefit Plan that provides for tax deductible funding for an expected future retirement benefit. The 412(i) refers to the section of the IRS code, which provides for the fully insured option. A plan qualifies under 412(i) (very generally) if:
*All plan benefits are funded and guaranteed by individual level premium insurance company contracts
*All premiums are paid and no loans are allowed
The 412(i) has some positive aspects to the program that make it extremely attractive in today's volatile environment. The best benefit is that funding amounts are determined by calculating the future benefit based on the guaranteed rates. What this means is the IRS allows us to fund up to the max for future benefits using the minimum guaranteed rate for our projections. This allows higher contributions and larger tax deductions for our clients. In addition, more cash is generated at retirement (assuming the contract performs better than the minimum guarantee). Because the insurance company guarantees the benefits, the plan is exempt from the more stringent funding requirements of the Code. This is an opportunity and does generate big cases and big deductions.
So who are the best candidates for a 412(i) plan? Some examples include:
*Small businesses with less than 5 employees
*Baby boomers over age 45
*Moonlighting Professionals
*Over funded Defined Benefit Plans
The 412(i) approach is not an answer for every Defined Benefit plan, but it can solve some big problems in the right situation. ISN Network is working with two of the leading 412(i) vendors in the country. The first step to find out if 412(i) is right for your client is to ask for a feasibility study. If the 412(i) is right for your client and meets their goals and objectives we can help you to close the "BIG CASE."
Contact ISN Network at 1-800-338-1892 for more details.
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