412(i) plans and Schedule B

[Guest flyfisher]

Are 412(i) defined benefit plans required to file a schedule B with the 5500?

[WDIK]

From page 17 of the Form 5500 instructions:

"Code section 412(i) insurance contracts" are contracts that provide retirement benefits under a plan that are guranteed by an insurance carrier. In general, such contracts must provide for level premium payments over the individual's period of participation in the plan (to retirement age), premiums must be timely paid as currently required under the contract, no rights under the contract may be subject to a security interest and no policy loans may be outstanding. If a plan is funded exclusively by the purchase of such contracts, the otherwise applicable minimum funding requirements of section 412 of the Code and section 302 of ERISA do not apply for the year and a Schedule B is not required to be filed.

[Lame Duck]

There is one exception to the exemption from filing a Schedule B. In the September-October 2003 edition of the ASPA Journal there is a very good article on 412(i) plans by Lawrence Deutsch. In it he says, "If a 412(i) plan is top heavy, as described in Code Section 416, it may be necessary to maintan an auxiliary fund to meet those top-heavy minimum benefits not met by the insurance or annuity contracts. Thisd requirement is described at Treas. Reg. 1.416-1 QW&A M17. If an auxiliary fund is required, a funding standard account must be maintanied, and each Form 5500 filing must include a completed Schedule B.

[Guest cease]

In a 412(i) plan, is funding determined without regard to top-heavy minimums? This is a very interesting issue.

[AndyH]

If one is to touch a 412(i), one should wash one's hands thoroughly afterwards.

No, actually, my comment is that I hope you guys are selling these things instead of servicing them. Talk about working smart (sort of) versus working hard.

[WDIK]

I neither sell nor service 412(i) plans. I just read IRS instructions for the fun of it.

[Blinky the 3-eyed Fish]

Cease, TH minimums do factor into 412(i) funding. So why a TH 412(i) would have a formula that provides for less than the TH minimum is beyond me, but I am sure someone could come up with a reason.