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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Pension plan without life insurance

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I just read your opinions on 412(i) plans and couldn't agree more. Why would a DB need a life insurance policy?

A: Certainly pension plans can be funded with other investments but most self-employed people who start these small business pension plans do not necessarily want more life insurance but they find that all of the commercially available pension plans use life insurance in order to make compliance easier. The problem is that the high fees and commissions lower the rate of return to the pension plan. The easiest way around this is to use a non-commercial plan prototype from a fee-only firm like Freedom Benefits to set up a pension without life insurance. On the other hand, there is nothing wrong with including some life insurance in a pension plan if the plan calls for continued benefits to employees even if the employee dies before normal


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