A Professionally Accredited Consulting Actuaries Firm

412(e)(3) Plan Administration.

turn-key fully-insured pension administration

Fully funded defined benefit plans originally were known as 412(i) plans, named for that section of the Internal Revenue Code. The earliest ones date back to ERISA (1974). It took until about 2000 for them to receive their current level of popularity, which is when we began offering turn-key services in this specialized area. About ten years later they were recodified by the IRS as 412(e)(3) plans. Compliance for these plans can be complicated, and very specialized actuarial education and experience is needed.

In the last ten years, we have proposed in excess of 4,000 plan designs in the areas of defined benefit and 412(e)(3) plans. Many of those have become our clients. If you would like to submit confidential data to us for a plan design, please refer to our Request for Proposal.

Our practice is unusually rare by incorporating both plan administration and prior experience in product development associated with the plans. We are also unusual in this area in our compensation, which is derived from client fees and not from product commissions. So although we are very knowledgeable about products, our remuneration is not influenced by them. In this way, we are one of a select group of fee-based actuarial TPAs active in the 412(e)(3) market.

Management Series Topic

412(e)(3) pension plans are well suited to meet the need for tax leverage present in many profitable small businesses. Although the following white paper will not turn you into an expert, we trust this it will reveal the tremendous opportunities inherent in 412(e)(3) plans.

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We are pleased to offer turn-key services, including the following brief overview. Please contact us for a detailed list of services.

  • Design the plan, and create of the volume-submitter document and related compliance material. This can include the conversion of a traditional defined benefit plan into a 412(e)(3) plan.
  • Annual funding calculations, compliance testing, participant certificates, and distributions from the plan
  • Communication with various stakeholders
  • Preparation of the plan’s tax return and related government filings. Also, prepare GAAP balance sheet values when needed.
  • Discussions with the IRS, DOL, and PBGC when needed
  • Client representations during audits as an Enrolled Actuary
  • Ultimate termination of the plan

Our clients’ 412(e)(3) plans tend to fall into the following categories. About 75% of them include life insurance.

  • Stand-alone plans:
    • Straight 412(e)(3) plans
    • Split funded 412(e)(3) plans (including life insurance)
  • Plans designed in combination with a 401(k) or profit sharing plan:
    • Straight 412(e)(3) plans
    • Split funded 412(e)(3) plans (including life insurance)

As an independent organization, we welcome the opportunity to work with a variety of quality insurers. To date, we have taken on 412(e)(3) plan assignments in conjunction with the following:

  • American National
  • Aviva
  • AXA Equitable
  • Guardian
  • Hartford
  • Indianapolis Life
  • John Hancock
  • Lafayette Life
  • Life of the Southwest
  • Lincoln National
  • MassMutual
  • National Life of Vermont
  • Northwestern Mutual
  • Pacific Life
  • Principal Financial
  • Securian / Minnesota Life
  • Transamerica

Additionally, we have had discussions with other insurers about the 412(e)(3) market, including Allianz, American Express / IDS Life, Canada Life, Midland National, and Penn Mutual. In several instances, we are working with them in the more generalized area of defined benefit plans.

If you would like to find out more about these plans, refer to our white paper on the subject, or listen to a radio interview with Mark Zingle as a guest expert.

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