Title: 412(i) Fully Insured Plan: Maximum Tax Deductions with Guaranteed Retirement Income
1412(i) Fully Insured PlanMaximum Tax Deductions
with Guaranteed Retirement Income
Transamerica Occidental Life Insurance Company
2- This presentation has been prepared solely for
use by producers of Transamerica Insurance
Investment Group (Transamerica). Transamerica
and its representatives do not give ERISA, tax,
or legal advice. This presentation is for
informational purposes only and should not be
construed as ERISA, tax, or legal advice. Clients
and other interested parties must rely solely on
independent tax advisors regarding information
and interpretations contained herein as well as
other rules and requirements related to qualified
retirement plans. - Discussions of the various planning strategies
and issues are based on our understanding of the
current applicable federal income, gift, and
estate tax laws in effect at the time of
publication. However, tax laws are subject to
change and interpretation, and Transamerica
cannot provide assurance that the relevant tax
authorities would necessarily accept our
understanding. Additionally, the information
presented here does not take into consideration
the general tax and ERISA provisions applicable
to defined benefit retirement plans or the
applicable state laws of clients and prospects. - Although care has been taken in preparing this
material and presenting it accurately,
Transamerica disclaims any implied or actual
warranties as to the accuracy of any material
contained within and any liability with respect
to it. In particular, calculations attributable
to The Heritage Group, LLC are presented herein
solely for their illustrative and comparative
value. This information is current as of
September 2003.
3412(i) Fully Insured Plan
- Guaranteed retirement benefits
- Ideal for business owners to build their
retirement savings - Can maximize tax deductions
4What is a Qualified Plan?
- Provides retirement, disability and/or death
benefits - Must meet specific IRC requirements
- Qualifies for tax-favored treatment
- Deductible contributions
- Tax-deferred growth
- Plan cannot discriminate
5What is a 412(i) Plan?
- A defined benefit qualified retirement plan
- Funded exclusively with annuities and life
insurance products - Exempt from minimum funding requirements
- Contributions based on present value of future
benefits - Life insurance provides family protection
6Traditional Defined Benefit vs.412(i) Fully
Insured Plan
Traditional plan 412(i) plan
Limited early contributions Larger contributions in early years
May become over/under-funded Always fully funded
Quarterly contribution deadlines Funding extended to tax filing deadline
7How a 412(i) Plan Works
- Funded exclusively with insurance contracts
- Contributions tax-deductible to employer
- Contributions pay annuity and life insurance
premiums - Plan assets grow tax-deferred
- Portion of death benefit received tax-free
8How a 412(i) Plan Works
Business makes tax-deductible contributions to
412(i) plan.
412(i) plan purchasesannuities and insurance
policies.
Retirement distributionsmade/benefits rolled
toanother Qualified Plan.
9Case Study S CorporationJohn Barrister
10Case Study Tax Consulting Firm
- Highly profitable
- Consistent earnings
- Owned by husband and wife
- One salaried employee
- Large number of independent contractors (not
eligible to participate in the plan)
11Case Study Tax Consulting Firm
12The 412(i) Team
- Insurance Producer
- Third-Party Administrator
- Professional Advisors
13The Role of YourInsurance Producer
- Helps you define retirement objectives
- Gathers employee census
- Discusses contribution levels
- Advise on suitability/appropriateness of 412(i)
plan
14The Role of the Third-Party Administrator
- Develops suitable plan proposal
- Helps prepare plan documents
- Annual plan administration
- Calculates plan contributions
- Prepares required reports
- Handles distributions
15The Role of YourProfessional Advisors
- Help you develop realistic objectives
- Work up projections and analyses
- Help draft plan documents
- Provide tax and legal advice
16Benefits of a 412(i) Plan
- Maximize contributions and deductions
- Limit complexities of traditional defined benefit
plans - Minimize market risk
- Benefits can increase over timewhich can help
offset effects of inflation
17Who Can Benefit from a 412(i) Plan?
- Highly paid business owners and
- professionals
- Small, closely held businesses
- Depending on employee characteristics, some
employers with larger employee groups - Businesses exhibiting financial stability
- Owners preferring security over uncertainty
18412(i) Fully Insured PlanMaximum Tax Deductions
with Guaranteed Retirement Income
OLA 1203 0903