Lincoln Financial Offers Annuity, Insurance Products for 412(i) Plans

August 29, 2003 ( - Lincoln Financial Group has unveiled annuity and insurance products designed to fund 412(i) defined benefit retirement plans for small businesses.

According to a company news release, Lincoln’s Retirement Benefit Annuity and WL-Icv (whole life, cash value product) can be used to fund a 412(i) plan.

A 412(i) plan is funded exclusively with insurance company annuity contracts or a combination of annuity contracts and life insurance policies. A 412(i) plan allows employers to make maximum contributions and include a large amount of pre-tax life insurance. According to Lincoln Financial, because 412(i) plans are funded exclusively with insurance company contracts, the funds within the plans are protected against negative returns, bear markets and sub-par investing performance.

Lincoln officials said business owners age 40 and older who want the certainty of an income benefit at retirement and value large deductions would benefit from a 412(i) plan. The firm’s target market for the plans: corporations, Sub S, partnerships, and self-employed firms that are established and financially sound with 15 or fewer employees.

According to the Lincoln news release, the 412(i) plans provides financial advisors the opportunity to offer small business owners important advantages, such as:

  • guaranteed retirement income – Funded with insurance product guarantees, the plan generates retirement income that is guaranteed, regardless of market conditions or investment performance. The Lincoln National Life Insurance Company provides the guarantees.
  • tax advantages – Employer contributions are tax deductible, employee benefits are tax deferred.
  • larger contributions – The plan uses the more conservative guarantees in an insurance policy to calculate plan contributions. The more conservative assumptions tend to make the initial plan contributions larger than traditionally funded plans.
  • reduced fees – Since the cash value of an insurance product is actuarially determined, the plan is not required to have an enrolled actuary sign off on the sufficiency of the plans assets or determine the plan’s normal cost.
  • life insurance benefits – The plan may provide a substantial death benefit to participants on a tax-deductible basis.
  • asset protection from creditors – Qualified plan assets are protected from the claims of creditors.