Definition
A defined benefit plan that is funded with individual insurance (life and/or annuity) contracts.
Also referred to as an Insurance Contract Plan or Fully Insured Plan.
Referring Cite
Additional Helpful Information
A 412(i) plan may also be funded with group insurance or annuity contract, providing they meet the requirements that are established individual contracts.
According to IRC Section 412 (i), a plan is described as an insurance contract plan if-
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The plan is funded exclusively by the purchase of individual insurance contracts.
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Such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective),
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Benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid,
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Premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy,
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No rights under such contracts have been subject to a security interest at any time during the plan year, and
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No policy loans are outstanding at any time during the plan year.
