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Katt & Company is a fee-only life insurance / actuarial advising firm. We work with clients throughout the U.S. - primarily by phone, mail, email and telecopy. Typically, we assist clients buying life insurance, those who need existing policies reviewed and managed, and in support of litigation. We also assist clients with disability income and long term care insurance. The June 2002 Forbes magazine named Peter Katt as one of only four nationally recognized advisors, stating, "…advisers are well worth the money…[T]hese savants are working for no one but you…" For references please contact us. 412(i)s are defined benefit pension plans that require all plan assets be in the form of life insurance or annuities. Many 412(i) plans are legitimate, but unfortunately some have also become a favorite "wrapper" being used by the same folks that brought us abusive VEBAs and 419 plans. Generally, abusive 412(i) plans feature contributions four times larger than are associated with conventional 412(i) plans and include the purchase of the funding life insurance policy from the plan after five years. The policy's cash surrender value when purchased in five years is very low with cash values then skyrocketing (at about an annual compounding rate of 40%) for the next five years. This of course is our old friend springing cash values. Pension experts tell me these abusive 412(i) plans will be attacked by the IRS for their excessive contributions and the purchase of the life insurance policy as a Prohibited Transaction. A plan I recently reviewed was accompanied by two legal opinion letters. One gave a more likely than not opinion that the IRS is stuck with valuing a life insurance policy for its total policy reserves. The other legal opinion letter gave the all-clear on everything but it noticed nothing. Please review the redacted report to my client about this abusive 412(i) plan. What is black and white and red all over? An abusive 412(i) legal opinion letter after its author has been impaled with his own letter opener by an outraged 412(i) buyer who has just emptied out his savings to pay taxes, penalties and legal fees in an attempt to defend his position.
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