Alternative Retirement Plan Could Be Good Fit for Small Business

Retirement planning is never easy, especially if it's up to just you to work out all of the details for your employees. If you might be thinking that a 401(k) plan isn't the best fit for your business, take a look at this recent Tools & Tips column on NFIB.com, which discusses whether a 412(i), which combines pension payouts and life-insurance protection, could be a good choice instead.

Some of the plan's pros include:

• Funded exclusively by individual annuities or a combination of annuities and life-insurance contracts


• Can provide fixed, known monthly retirement benefits, life-insurance protection and, relative to other plans, large tax-deductible contributions (in excess of $300,000) that can build a substantial retirement fund in just a few years


• Any business, whether C Corporation, S Corporation, partnership or sole proprietorship, can establish a 412(i) plan

And some potential cons include:

• Because of the large contribution levels, 412(i) plans are not for struggling companies


• Unlike some other pension plans, loans against 412(i) funds are not allowed


• There is no investment flexibility. By law, a 412(i) must be funded entirely with insurance and annuity contracts