In retirement terminology, the term 412(i) Plan or fully insured plan, refers to a United States retirement plan which meets the requirements of the Internal Revenue Code or IRCís Section 412(i). This section of the IRC defines and details the qualification rules for 412(i) trusts and plans. A 412(i) Plan is a defined benefit pension plan funded exclusively by life insurance or annuity contracts.
For example, 412(i) Plans are a more expensive type of retirement account which caters primarily to small business owners. Because these plans are based on a specific formula which combines compensation and/or years of service, these plans tend to fit the needs of small business owners. In addition, these plans also allow for greater contributions than other normal plans with defined benefits. Another reason small business owners consider these plans is because the funds are administered in an annuity or insurance contract, thereby making the funds fully insured regardless of how the small business fares. Otherwise, the 412(i) plan works like most other United States retirement accounts.