412(e)(3) Fully-Insured Defined-Benefit Plans Maximize your retirement by maximizing your deduction.
A 412(e)(3) plan — formerly known as a 412(i) — is an IRS-qualified defined-benefit pension plan. Your business makes tax-deductible contributions to it each year, and those contributions purchase guaranteed annuity contracts — and, in some designs, life insurance — that fund your future retirement benefit. Because that benefit is guaranteed by the contracts, the IRS allows larger deductible contributions than most other plans — often a substantial figure for a high-income owner with a short runway to retirement. We help design and run these.
A pension built on guarantees.
It’s the rare qualified plan where the promised benefit is locked in by contract — which is also why it can support significantly larger deductible contributions than many traditional plans.
Most defined-benefit plans rest on an actuary’s assumption about future investment returns. A 412(e)(3) does not. It is funded with guaranteed annuity contracts — and, in some designs, also life insurance. There are no equities and no assumed rate of return; the promised retirement benefit is backed by the contracts themselves.
Because the benefit is guaranteed by contract, the plan can be funded on an accelerated schedule. For an owner with a short runway to retirement, that often means significantly larger deductible employer contributions than many traditional retirement plan options allow at the same age and income. The deduction comes from funding a qualified retirement plan — not from any special treatment of insurance premiums.
A 412(e)(3) requires level annual contributions through retirement age, plus a third-party administrator to handle the plan document and annual filing. It is a specialized pension strategy that fits a specific kind of high-income business owner — and only when it’s designed conservatively and funded consistently.
$100K–$400K+
Typical annual deduction
Versus $72K for a SEP-IRA or solo 401(k) in 2026 ($80K with the age-50 catch-up) — the exact figure is set by the IRS maximum-benefit limit and your income.
~$50K–$200K
Typical annual tax saved
At top marginal brackets, roughly $0.50 back on every $1 contributed — the deduction reduces federal and state income tax at your combined marginal rate.
100%
Contractually guaranteed
Funded with guaranteed annuity and insurance contracts — no market assumptions, no funding volatility.
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.
Of the three, a 412(e)(3) allows the highest contribution limits.
Traditional defined benefit plan
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
Cash balance plan
Hybrid plan.
Predictable contribution.
A cash balance plan keeps the defined-benefit 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 a traditional defined-benefit plan and a 412(e)(3).
- Notional individual accounts with stated interest credit
- Predictable annual employer contributions
- Higher ceilings than a traditional defined-benefit plan, lower than 412(e)(3)
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 some of the highest deductible contributions in the qualified-plan code — well above a traditional defined-benefit plan at the same age and income.
- Funded only with insurance and annuity contracts
- Highest contribution ceilings — $100,000 to $400,000+ common
- Requires a third-party administrator and annual plan filing
Who a 412(e)(3) is actually built for.
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, professional, or business owner — physician, attorney, consultant, or specialty practice — 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. You’ve heard 412(e)(3) mentioned — maybe even looked into it — but it stalled because no one around you knew how to execute it.
- iv. Your taxable income is high enough that a $100,000 to $400,000+ deductible contribution would materially change your tax bill.
What a 412(e)(3) can look like.
Consider a 58-year-old business owner running a solo professional practice, no full-time employees beyond himself, nets roughly $650,000 a year, and has about a seven-year runway to retirement. Because the plan’s benefit is locked in by contract, he can fund — and deduct — far more than any defined-contribution plan would allow.
~$340K
Annual deductible contribution
More than four times the $80,000 he could put into a solo 401(k) with the age-50 catch-up. It reflects the IRS’s reduced benefit limit for a runway under ten years.
~$150K
Estimated annual tax saved
At a combined federal and California marginal rate of about 45% on the deductible contribution.
7 yrs
Funding runway
Level annual contributions through his planned retirement age, building a substantial guaranteed benefit.
When the plan is designed with life insurance inside it, that death benefit passes tax-free to the family if the participant dies during accumulation — protection alongside the retirement funding.
Illustrative only. The exact deductible contribution is set by the IRS maximum-benefit limit for defined-benefit plans and your income — a feasibility analysis produces your actual numbers.
From question to funded plan, run in coordination.
A 412(e)(3) is engineered and modeled for your specific situation, pressure-tested for compliance, and implemented after a detailed assessment.
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Initial consultation
A short, no-obligation conversation about age, entity structure, income consistency, and employee census — enough to determine whether a 412(e)(3) is a viable structure for your retirement needs, or whether a cash balance or traditional defined-benefit plan is the better fit.
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Feasibility analysis
The deductible contribution and projected accumulation are modeled from your specific age, income, and entity structure, with a side-by-side comparison to traditional defined-benefit and cash balance designs. You see real numbers before any commitment.
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Design & coordination
The plan is designed in coordination with a 412(e)(3) third-party administrator — with conservative funding and clean disclosures from the outset. Everything is reviewed before anything is filed.
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Implementation
The business adopts the plan and sets up its trust, then the contracts are issued to the plan and the first deductible contribution is made for the tax year. Remain stays in the file alongside the administrator — carrier service, contribution updates, and eventual plan termination or rollover.
Supporting strategy
A professional pension, tuned to the practice.
412(e)(3) is one form of a broader idea: a defined-benefit pension built around a single high-earning owner. Where the fully-insured route is too narrow — younger owners, larger staff, or a need for market upside — a cash balance or hybrid professional pension often carries the same deduction-first logic with more flexibility. We model both, then recommend the structure your numbers actually support.
FAQ
How much can I actually deduct?
Far more than the plans most owners already know. A SEP-IRA or solo 401(k) caps out at $72,000 a year in 2026 ($80,000 in a solo 401(k) with the age-50 catch-up). A 412(e)(3) can deduct well past that — commonly $100,000 to $400,000+ per year, with the high end reserved for older owners funding a large benefit over a short runway. The exact figure is set by the IRS maximum-benefit limit for defined-benefit plans and by your income, and comes out of the feasibility analysis.
What if I have employees?
A 412(e)(3) is a qualified plan, so it is subject to coverage and nondiscrimination rules — employees generally must be covered. The math works best for owners with few or no full-time employees, so it fits solo and small professional practices well. Where a larger staff makes the fully-insured route inefficient, we model a cash balance design instead.
Why doesn’t my financial advisor just set this up?
Most aren’t set up for it. A 412(e)(3) is funded entirely with insurance and annuity contracts and run under a specialized third-party administrator — a combination most general practices simply can’t design or place. That’s what we do.
Why do I need an insurance advisor to assist in this process?
A 412(e)(3) is funded entirely with annuity contracts — and, in some designs, life insurance. Those contracts have to be selected and placed by a licensed insurance professional, and the way they’re structured is what determines whether the plan stays compliant and the deduction holds. That’s where we come in. Life insurance inside a 412(e)(3) is capped by IRS incidental-benefit rules, so most conservatively-designed plans are annuity-only or annuity-heavy — when life insurance is included, its size is limited by the plan’s projected retirement benefit.
What happens to the plan later?
412(e)(3) plans are typically funded heavily for a defined number of years and then frozen, terminated, or rolled into an IRA — converting the accumulated, tax-favored value into ordinary retirement assets. That exit is planned from day one, and Remain stays in the file alongside the administrator — carrier service, contribution updates, and the eventual wind-down.
Request a feasibility analysis.
Tell us a little about your situation. Remain Life Insurance Services, LLC models the deductible contribution and projected accumulation from your age, income, and entity structure — run in coordination with a 412(e)(3) third-party administrator — and replies within one business day.