To The Editor:

For over 25 years I have been designing and recommending 412(i) plans. But these plans are not for everyone. These plans over time only work in very limited situations.

About five years ago about four or five life insurance companies had approved products for and knew what a 412 plan was. The marketing people at most of the insurance companies we used to contact had no idea what a 412(i) plan was.

Recently, I noticed that too many insurance companies and their managers have been very aggressively promoting the 412(i) plans as if everyone and every employer should have one. This is done mostly as a way to sell their life insurance policies and get a big commission regardless of future results to the clients.

The Dec. 9 article and the aggressive plan comparison of Scott Hunken, general agent for Guardian, is an example. How much of the $338,216 in the example of Mr. Hunken for age 60 is for life insurance? Sixty-six percent or $223,080? And how much is the surrender value of this policy if it has to be surrendered in, say, the third year?

These abuses sooner or later are going to give the insurance industry another black eye. Apparently, Congress is already taking notice.

National Underwriter and other magazines should evaluate the information they are printing and should act for the benefit of the public rather than for the insurance industry and ad money.

The abuse and bubble of the 412(i) will burst as the technology bubble did. NU is free to print this as a cautionary letter to those who are not familiar with this plans risk, penalties and limitations.

Placido “Pete” Blanco, CFP
via e-mail


Reproduced from National Underwriter Life & Health/Financial Services Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.