412(i) Defined Benefit Plans
Description of 412(i) Plan
A 412(i) plan is a type of retirement savings plan that was developed to provide
retirement income with either an individual annuity contract or with annuity and life
insurance contracts that fully guarantee the cash value before retirement and the benefits
after retirement, in accordance with terms specified under Internal Revenue Code Section
A 412(i) plan is a “defined benefit” as opposed to a “deferred compensation” plan. In a
defined benefit plan, the amount of benefit to be received from the plan is defined at the
inception of the plan, usually as a percentage of a participant’s compensation, and the
contract and consequently the premium are designed to provide and guarantee that
specific benefit amount. In a defined contribution plan, the contribution amount is
determined, but the amount of benefit eventually available will depend upon the total
contributions and earnings accumulated in the plan over time.
• Risk is eliminated because the 412(i) plan is funded with a fully guaranteed
annuity contract or an annuity and life insurance product, rather than with an
investment or securities-based product.
• Benefits accruing in the plan are always equal to the cash value of the underlying
• Since a 412(i) is categorized as a type of “qualified” retirement plan,
contributions to the plan are deductible as business expenses. Designed properly,
deductible contributions may be significantly larger than what is allowable with
other types of plans.
• The plan sponsor is not required to engage in an “enrolled” actuary or file
Schedule B or Form 5500.
Description of Northwestern Mutual’s RAI Product for Funding 412(i) Plans
Northwestern Mutual’s Retirement Annuity with Insurance (RAI) product was
specifically designed to fund retirement benefits under the requirements of IRC Section
Features and benefits:
• Eliminates investment risk that a defined benefit plan sponsor