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§412(i) Quick Facts

1. What is a 412(i) Plan?

-	Special defined benefit pension plan
-	Plan investments are annuities or a combination of life insurance and annuities
-	Less Expensive than other plans
-	No actuarial certification required
-	Generates significantly larger deductions than other defined benefit plans because it uses lower actuarial growth assumptions
-	Traditional DB actuarial growth assumption ranges between 6 - 8.5%
-	§412(i) DB actuarial growth assumption ranges between 2 - 4.5%. It is based upon an interest rate guarantee offered by the insurance company

2. Who are the ideal prospects

-	Businesses with less than 8 employees
-	Owner is older than the employees
-	Owner earns much more than the employees
-	Company with stable income since the plan has annual funding requirements
-	Existing profit sharing or other retirement plan
-	Sole Proprietorship; Partnership; "S" Corporations; "C" Corporations; LLC's

3. When do clients need to act?
-	Plan must be adopted on or before that fiscal year-end
-	Plan can be funded up to the client's tax filing date
-	Policies are dated in the Plan Year

	Why are these plans popular?
-	Clients looking for larger deductions
-	Clients want to purchase insurance survivor benefits on deductible basis
-	Clients want to shorten retirement funding periods
-	Clients want Guarantees
-	Clients are unhappy with existing plans

	What do I do next?
-	Target client needs
-	Obtain and complete a Proposal Request/Census Data Form
-	Fax to PennMont Benefit Services (610-992-1091) for suitability Review
-	Receive client ready proposal
-	Receive and have client complete PennMont prepared Plan adoption package
-	AVAILABLE SOON:
	Visit www.412iplan.net for an on-line quotation (coming in August 2003)!

4. What Every Employer Should Know About a DB Plan

-	The employer must fund (contribute to the plan) on a systematic basis, not as benefits come due (i.e., not when participants retire or sever employment)
-	Contribution amount is determined annually by an actuary (not accountant, attorney, employer, etc.)
	Contributions must be made even if the employer…
-	Has no profits for the year
-	Cannot use the tax deduction
-	Has no earned income
-	Must borrow money to make the contribution

	The Pension Benefit Guaranty Corporation (PBGC) underwrites defined benefit plans, subject to a maximum amount per person ($3,579.55/mo for 2002)

-	Annual premiums are paid to the PBGC every year for this coverage. There are certain exempt organizations, however.
-	$19 per participant PLUS
-	Variable premium based on underfunding of plan

	Variable premium is determined by the actuary

	Exempt plans:
-	Cover only owners and their spouses
-	Professional firms with less than 25 employees