|What Congress actually came
up with was more of a refurbishing of an existing Code provision that has
been around for decades - Section 412(i).
|A 412 i plan is really a
defined benefit plan. [Anyone know what a defined benefit plan is?]; well it
means a pension plan that provides a defined benefit for the plan participant
at some future designated retirement date, typically 65 years of age.
|They wanted first, a safer
way of investing retirement monies. A
412 i plan provides a guaranteed retirement income for the plan participant,
no matter how the underlying financial instruments perform. It accomplishes
that goal by using guaranteed financial products – to build funds toward retirement.
|It provides a much more
cost-efficient return on the plan participant’s investment toward
retirement. They wanted some
flexibility so that a change in circumstances of the business owner could be
|And, they wanted to get away
from the massive amount of actuarial machinations bureaucratic red tape and
excessive paperwork of traditional pension plans.
|The re-introduced 412i plan
can allow for greatly increased tax deductible contributions and
corresponding deductions and benefits at retirement.
|Plus, the opportunity to
draft into the plan some disability and death benefits.
|And, above all, the whole
thing is sanctioned under ERISA, a specific Code provision. This is to be contrasted with interpreting
Code provisions into a gray area and hoping the IRS does not catch up with