All human beings desire financial security and stability at all stages of life. This requirement becomes even more palpable during retirement. After retirement, the only way to achieve financial security is through Pension Plans. There are many pension plans available today, but one should choose according to his or her specific needs.

Defined Benefit Plans may be the best solution to providing sufficient retirement income with the most tax saving option.

412 e 3 Defined Benefit Plan:

This is a defined benefit pension plan where the annual contribution is calculated in accordance with the rules of the Internal Revenue Code section 412 (e)(3). These pension plans have been around for over 50 years. These benefit plans provide a guaranteed return at the time of retirement and are not subject to market conditions.

412i Defined Benefit Plan:

This is the same as the 412 (e) (3) plans. The Internal Revenue Code section was changed from 412 (i) to 412 (e) (3). The 412(i) Defined benefit Plan is funded with fully guaranteed fixed annuities and can also provide life insurance. Here also, an actuary is not needed to implement these plans. The employer gets a tax deduction for his contributions, which are used to pay premiums on the insurance contract covering the employee. This is a more attractive retirement alternative to the TDBP (traditional defined benefit plans) since the rate of return is fully guaranteed; this gives immunity to the individual from any investment risk.

Both these plans have certain advantages when compared to traditional defined benefit plans:

• These plans have a simple plan administration;

• The insurance company guarantees secure future benefits;

• There is provision for potential death benefit;

• The life insurance comes with a disability protection;

• The initial deductions are larger and,

• There is more stability in the contribution level.

• The benefit plan assets are protected from creditor claims under ERISA (Employee Retirement Income Security Act).

Cash Balance Pension Plan:

A Cash Balance Pension Plan is a defined benefit pension plan that is certified by ERISA. A Cash Benefit Pension Plan can maximize your tax savings and effectively leverage your retirement contributions. In a traditional benefit plan, the benefit is in the form of a series of lifelong monthly payments that begin at the time of retirement. But a Cash Balance Pension Plan, the benefit is in terms of a specific account balance.

Executive Pension Plan:

The Executive Pension Plan is actually an Executive Bonus Plan. This is a plan through which an employer can select some of his employees whom he wants to include in the plan. The employer makes contributions to the plan and each chosen employee receives 1099 for the contribution. The employer also receives some benefit as this contribution is tax deductible for him.

Pension Plans for Small Businesses:

There are many Pension Plans for Small Businesses available which can specially maximize benefits for small business owners. Some such pension plans are: 412 (e) (3) Defined Pension Plan, the traditional defined pension plans, profit sharing plans and 410 (k). All these pension plans provide the advantage of tax deduction and deferred taxation.

These are just a few of the pension plans offered by insurance companies. You have to make a prudent choice according to your requirements. In case of confusion, it is always best to consult an expert.