Following is an unformatted dump of research notes. For a few complete articles see www.tonynovak.com/articles
http://zingleandassociates.com/papers/412i/shutdown.pdf links to applicable Revenue Rulings
https://www.allegisadvisorgroup.com/Content/Content/63/Documents/1_412e3%20-%20Beyond%20the%20Basics.ppt downloaded MassMutual powerpoint presentation
Requirements for “Separate Agreements” for §412(i) Pension Plans
This article discusses the information that must be included in the “separate agreements” between
plan sponsors and the insurance companies issuing individual insurance contracts that are used to
fund 412(i) pension plans. The IRS has received requests from practitioners to explain the
information needed for a 412(i) separate agreement to be acceptable to the IRS.
412(i) plans are pension plans funded exclusively by the purchase of life insurance and annuity
contracts. They are not subject to the funding rules that apply to other defined benefit plans if they
meet all of the requirements of section 412(i) of the tax code and satisfy relevant IRS guidance.
IRS regulations (§1.412(i)-1(b)(2)(ii)) issued under this Code section sets forth the timing, amount,
and duration of contract premium payments, provisions of which must be in the contracts
themselves, or alternatively, in a “separate agreement” with the issuer of the individual contracts.
If a separate agreement is used, it must be executed between the plan sponsor and the contract
issuer at plan inception and amended (or a new separate agreement must be entered into) each
time the plan adds a participant or whenever a participant receives a benefit increase.
Separate agreements containing the information in Part A (see below) will be considered
acceptable by the IRS, if the reconciliation record described in Part B is also maintained by the plan
A. Required Data for Each Participant Whose Benefits are Funded under
Contracts to which the Separate Agreement Applies
1. Participant’s name, social security number, date of birth, date of hire, and date of participation
in the plan.
2. For each contract funding benefits for this participant:
a. Form number, contract number, and issue date of the contract.
b. The dollar amount of the level premium, premium frequency (e.g., monthly, annual),
premium payment period (e.g., 10 years, to normal retirement age), the due date or
payment date of the first required premium, and the due date of each subsequent
premium (e.g., first day of each month). (Note: All requirements of
§1.412(i)-1(b)(2)(ii) concerning premium payment dates must be satisfied.)
c. The projected guaranteed annuity benefits provided by the contract (under the
normal form at the participant’s normal retirement age), assuming that premiums are
paid in accordance with the separate agreement.
d. A list of all optional forms of payment provided under the contract and the actuarial
factors used to derive each optional form at the participant’s normal retirement age.
B. Required Reconciliation
The plan sponsor must maintain records demonstrating that a plan’s projected annuity benefits at
normal retirement age under all forms of payment are equal in form and amount to the projected
guaranteed annuity benefits at normal retirement age under all forms provided by all contract(s)
that fund a participant’s benefits (as shown in all separate agreements relating to an individual
participant. (NOTE: All payment forms and amounts under the contract(s) and the plan must be
identical at normal retirement age for the plan to satisfy the requirements of §412(i).)
For this purpose, the IRS allows the plan sponsor to reconcile the dollar amount of the normal
form of payment at the participant’s normal retirement age under the plan and the contract(s),
and then to demonstrate that the actuarial factors used to calculate all optional forms are
identical under the plan and all contracts used to fund the plan benefits. The reconciliation
information itself need not be part of the separate agreement(s) with the insurer(s).•
Screen clipping taken: 7/18/2012 4:51 AM
IRS audit results
“Stay away from 419 and similar plans like Section 79 plans. Be very careful with 412i plans. Avoid most captive insurance plans. ”
Pasted from <http://www.ampminsure.org/fraud/about16333.html>