Anything can be abused. One sees it daily in the news. 412(i) plans are no exception. Unfortunately, there are some very aggressive individuals and administrators that have abused these plans.

On February 13, 2004, Pam Olson, Assistant Secretary for Tax Policy at the Department of Treasury, was quoted during the release of Revenue Rulings addressing 412(i) plans as saying: "The guidance targets specific abuses occurring with section 412(i) plans," stated Assistant Secretary for Tax Policy Pam Olson. "There are many legitimate section 412(i) plans, but some push the envelope, claiming tax results for employees and employers that do not reflect the underlying economics of the arrangements."

See text here: IRS Shuts down abuse in retirement plans.pdf
See web site here: www.irs.gov/newsroom/article/0,,id=120409,00.html

Does your 412(i) plan have one or more of the following?

1. Different type of life policy on the principal(s) than on the rank-and-file?
2. Life insurance on the principal(s) and none on the rank-and-file?
3. A mix of policies from different carriers?
4. “Excess” life insurance? In other words, an amount of life insurance coverage on participant(s) that exceeds the allowable payout under Revenue Ruling 74-307 or Revenue Ruling 2004-20?
5. Term Life Insurance?
6. Universal Life Insurance?
7. Does your plan exclude more than 30% of the Non-highly Compensated Employees yet include all of the Highly Compensated Employees?
8. If you have employees who meet the age and service eligibility requirements, does your plan cover at least the greater of 2 participants or 40% of those employees?

If you answered “YES” to one or more of the above, your plan may be subject to IRS penalties or disqualification. You may even be subject to the Listed Transaction rules!

Did you know that the fine for a Listed Transaction can be as high as $200,000 under the American Jobs Creation Act of 2004? Did you know there is no provision for the fine to be waived?

 

What is the Solution?

We at 412(i) Plans, Inc. have always illustrated plans that meet the letter and spirit of the law. We are proud of the fact all plans we administer are compliant.

However, many plan sponsors and their advisors bring plans to us that are “abusive” by definition. Why do they seek our services? Because we have developed a division within our firm to diligently solve the problems these plans present to their sponsors.

Think your plan may be in jeopardy? Believe your plan may be, by definition, “abusive”? Have you been told “Don’t worry about what you read, we have ways around that”? If so, you may want to contact us to discuss the issues.

For an initial no-cost consultation, call Bill Black, President of 412(i) Plans, Inc., toll free at 888.412.4120

More on Listed Transactions and Abusive Plans

Rev Rul 2004-16.pdf

Rev Ruling 2004-20.pdf

Rev Ruling 2004-21.pdf

Notice 2004-67 Listed Transactions.pdf

Securities offered through Ogilvie Security Advisors Corp.
71 South Wacker, Suite 3025, Chicago, IL 60606
Tel: 312.335.5476
Member FINRA www.finra.org / SIPC www.sipc.org
Ogilvie Security Advisors Corp and 412i Plans, Inc. are independently owned and operated.

About Us | Request Illustration | Implement a Plan | Plan Takeovers 412(i) Plan - What is it? | 412(i) FAQs | More About 412(i) | Abuses of 412(i) | Printable Brochures Monthly Newsletters | Mission Statement | Contact Us | Privacy Policy License numbers: California (0A09141) and Wisconsin (1045269) Last Updated 08-04-10 412(i) Plans, Inc. ©2007-10 ::: Hosted and maintained by www.liseydreams.com