NU Online News Service, Nov. 29, 10:40 a.m. – John Hancock Financial Services Inc., Boston, has introduced a 412(i) defined benefit plan targeting older small business owners who have not yet planned for their own or their employees’ retirement.
The program will help small business owners take advantage of pension savings “catch up” provisions in new federal tax legislation that take effect Jan. 1, 2002.
Fewer than 20% of businesses with fewer than 25 employees have qualified retirement plans. Hancock says it will be going after the 5.6 million small businesses that have no retirement plans.
Hancock’s 412(i) program will provide customized, qualified retirement plans funded exclusively with Hancock life insurance and annuity products.
The plan offers the highest allowed contributions and tax deductions of any qualified retirement plans available for business owners who are over age 45, Hancock says.
The law that created the new catch-up opportunities, the Economic Growth and Tax Relief Reconciliation Act, increases the amounts that older members of retirement plans can contribute.
Owners can get a tax break when using pension contributions to buy life insurance, then use the life insurance to generate tax-free income, Hancock says.
Hancock says it believes it is the first national brand-name company to enter the 412(i) market since EGTRRA was signed.