Defined Benefit Plans Quick Links
- 412(i)
A 412(i) plan is a type of defined benefit retirement plan. They are designed to create a "defined" amount of money by the time you reach retirement age. The amount you contribute to the plan each year depends on the progress toward that specific amount. - Traditional Defined Benefits
Under the traditional defined benefit pension plan, an employer promises to pay their employees a specific benefit for life beginning at retirement. The benefit is calculated in advance using a formula based on age, earnings, and years of service.
412(i) Plans
A 412(i) plan is a type of defined benefit retirement plan. They are designed to create a "defined" amount of money by the time you reach retirement age. The amount you contribute to the plan each year depends on the progress toward that specific amount.
A 412(i) plan is well suited for companies where highly compensated employees (over $80,000 annually) make up 15% or more of the workforce. It is best suited for smaller/family-owned profitable businesses.
In addition, a 412(i) can create a significant tax deduction.
Why Haven't I Heard of a 412(i) Plan?
412(i) plans have been around for decades. The reason they weren't used much until now is they didn't offer competitive investment returns. Business owners chose to pay the income tax on the money and invest the remaining amount instead of settling for lower returns.
Dugan & Lopatka Financial Services, LLC104 E. Roosevelt Rd., Wheaton, Illinois 60187Phone: (630) 665-0914Fax: (630) 665-5030
DUGAN & LOPATKA FINANCIAL SERVICES IS NOT AN AFFILIATE COMPANY OF LPL FINANCIAL. SECURITIES AND ADVISORY SERVICES OFFERED THROUGH LPL FINANCIAL, A REGISTERED INVESTMENT ADVISOR, MEMBER FINRA/SIPC.
