John Hancock Financial Services has introduced a 412(i) defined benefit plan for small business owners that are without retirement plans, the firm announced today. The new service takes advantage of recent changes in tax legislation, which will take effect Jan. 1 2002.

A 412(i) plan, also known as a ‘fully insured’ plan, differs from 401(k) and all other qualified retirement plans, because it provides employees with a guaranteed retirement benefit payable at normal retirement age, with reduced benefits payable at an earlier retirement date.

The plan is funded solely by Hancock life insurance and annuity products and offers the highest allowed contributions and tax-deduction of any qualified plans for business owners over age 45, according to Hancock. The firm plans to target the 5.6 million firms that have fewer than 25 employees and do not have a retirement plan.

Due to recent tax legislation as well as the Economic Growth and Tax relief Reconciliation Act of 2001 that President Bush signed earlier this year, 412(i) plans have become much more attractive, according to Hancock.

"The new law greatly expands retirement contributions and benefits, resulting in higher tax deductions and amounts of insurance that can be used in these plans," said James Magner, VP, estate and business planning group at Hancock.

Berkshire Retirement Services, a 412(i) specialist, will provide complete plan services for the new plan.

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