What is a Section 412(e)(3) Plan?

In a 412(e)(3) plan (sometimes called an insurance contract plan), each employee participant is provided with a guaranteed, predetermined benefit amount that is defined by the plan document. These plans can only be funded by the employer’s purchase of fixed annuities or life insurance and annuity contracts. Because plan benefits are guaranteed, 412(e)(3) plans are exempt from the funding requirements of IRC Section 412.

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