412(e)(3) Defined-Benefit Plans
The Right Buyer. The Highest Deduction in the Code.
A 412(e)(3) plan — formerly known as 412(i) — is an IRS-qualified defined-benefit plan funded entirely with life insurance and annuity contracts, with no other assets and no actuarial assumptions about market returns. Because the plan is contractually guaranteed by the underlying products, the IRS allows much larger deductible employer contributions in the early years — frequently $200,000 to $400,000 or more annually for a high-earning solo practitioner in their fifties or sixties. It is a narrow, technical, niche product. Most generalist agents have never sold one. Most CPAs know the strategy exists but cannot execute it.
Begin a conversation →Three plans. One retirement to fund.
Three qualified-plan structures address late-career retirement funding for high earners. They differ in contribution ceilings, investment mechanics, and the buyer profile each is built for. 412(e)(3) sits at one end of the spectrum — the highest contribution limits, the narrowest fit.
Market-funded. Actuarial assumptions.
A traditional defined-benefit plan is funded with market-based assets, with the actuary projecting investment returns to set the annual contribution. Returns are not guaranteed; market underperformance creates underfunding that the employer must make up. Contribution ceilings are real but bounded by the actuary’s assumed returns.
- Funded with market-based investments
- Annual contributions set by actuarial assumptions
- Underfunding risk absorbed by the employer
Hybrid plan. Predictable contribution.
A cash balance plan keeps the DB structure but creates individual notional accounts with a stated interest credit (typically 4–5%). Annual contributions are predictable; investment risk is shared between plan and employer. Contribution ceilings sit between traditional DB and 412(e)(3).
- Notional individual accounts with stated interest credit
- Predictable annual employer contributions
- Higher ceilings than traditional DB, lower than 412(e)(3)
Fully insured. Maximum deduction.
412(e)(3) is funded entirely with insurance and annuity contracts. The plan is contractually guaranteed by the underlying products, which is why the IRS permits the highest deductible contributions in the qualified-plan code — often two to three times traditional DB at the same age and income.
- Funded only with insurance and annuity contracts
- Highest contribution ceilings — $200K to $400K+ common
- Requires TPA, actuary, and insurance specialist coordination
412(e)(3) rewards the buyer who fits the profile precisely.
If any of these describe your situation, a feasibility analysis — modeling the deductible contribution at your specific age, income, and entity structure — is the right place to find out whether 412(e)(3) is the answer.
- i. You’re a solo practitioner — dentist, physician, attorney, or specialty group — with consistently high taxable income and few employees.
- ii. You’re in your 50s or 60s, you’ve maxed every other retirement vehicle, and you still feel behind on accumulation.
- iii. Your CPA has mentioned 412(e)(3), but the strategy stalled because no one in their network knew how to execute it.
- iv. Your taxable income is high enough that a $200,000 to $400,000 deductible contribution would materially change your tax bill.
Common questions.
What is a 412(e)(3) plan?
A 412(e)(3) — sometimes called a fully insured defined-benefit plan — is an IRS-qualified retirement plan funded exclusively with guaranteed annuity and whole life insurance contracts. The guarantees are the point: because benefits are insured rather than projected, contribution limits are often substantially higher than traditional plans allow.
How much can I contribute — and deduct?
It depends on age, income, and plan design, but for owners in their 50s and 60s, deductible contributions can run well into six figures annually — often several times what a 401(k) with profit sharing allows. The amount is determined actuarially from the benefit the plan promises, not from a fixed statutory cap.
Who is a 412(e)(3) right for?
The classic fit is a high-income owner or professional, typically 45 or older, with few employees, stable income, and a shorter runway to retirement — someone who wants the largest deductible contributions available and prefers guarantees over market exposure.
Is a 412(e)(3) actually IRS-approved?
Yes — it is written into the tax code; the name is the code section. The scrutiny attached to its predecessor era came from abusive designs, not from the structure itself. Clean design, a reputable third-party administrator, and an enrolled actuary keep the plan well inside the lines — which is exactly how we build them.
Is there market risk inside the plan?
No. By rule, the plan holds only guaranteed insurance contracts — fixed annuities and whole life. That is the trade: you give up market upside inside the plan in exchange for contractually guaranteed benefits and maximum deductibility.
For a full feasibility analysis, visit 412e3advisor.com.
412e3advisor.com is the firm’s dedicated 412(e)(3) defined benefit pension platform. Estimate the deductible contribution your age, income, and entity structure can support — often $100,000 to $400,000+ a year, well beyond a SEP or solo 401(k) — with a side-by-side comparison to traditional defined benefit and cash balance plans. The plan itself is then designed and implemented here, by Remain Life Insurance Services, LLC, in coordination with a 412(e)(3) third-party administrator and actuary.
Or speak with a Remain advisor directly.