§412(e)(3) Educational Estimator

Methodology

1. No contribution, deduction or benefit amount is calculated. Your answers select which statutory conditions and IRS points to raise with a plan professional.

The conditions and figures it uses

The six conditions of 26 U.S.C. § 412(e)(3), quoted from the statute; the IRS statement that an arrangement in which the employer deducts premiums on life insurance whose death benefit exceeds the participant's death benefit under the plan by more than $100,000 is a listed transaction (Rev. Rul. 2004-20); and the 2026 section 415(b)(1)(A) limit of $290,000 from IRS Notice 2025-67.

1. (A) the plan is funded exclusively by the purchase of individual insurance contracts,
2. (B) such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective),
3. (C) benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid,
4. (D) premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy,
5. (E) no rights under such contracts have been subject to a security interest at any time during the plan year, and
6. (F) no policy loans are outstanding at any time during the plan year.

• 26 U.S.C. § 412(e)(3), govinfo (United States Code, 2024 edition)
• IRS, Fully insured 412(e)(3) plans
• Rev. Rul. 2004-20, Internal Revenue Bulletin 2004-10
• IRS, Recognized abusive and listed transactions
• IRS Notice 2025-67, 2026 amounts relating to retirement plans
• 26 U.S.C. § 415(b), govinfo (United States Code, 2024 edition)

Limitations

• A contribution, deduction or benefit amount cannot responsibly be estimated from a short questionnaire.
• The estimator does not decide whether a plan qualifies or suits a business.
• Educational illustration only. Not a quote, actuarial calculation, tax or legal advice, or individualized financial or insurance recommendation.
• Structure, ownership and tax treatment should be confirmed with qualified tax, legal and insurance professionals.

Methodology version 1.2.0, 2026-10-13.