419 Welfare Benefit Trust

A "419(e) plan" is an employer-sponsored fringe benefit plan that provides welfare benefits such as death benefits, sickness, accidents, disability, death, unemployment or post retirement medical benefits to eligible participants.

Welfare benefits are not pension or retirement benefits. IRC Section 419 allows employers to take deductions, within certain limits, for contributions generally made to a trust to fund welfare benefits for employees.

419(e) plans use term insurance to fund death-benefit only benefits. Universal life insurance is used for post-retirement medical, disability and unemployment benefits. Loans against the cash value or cash withdrawals are also used to pay for welfare benefits.

419(e) plans are often a good way for a small business to attract and keep key employees, while getting a tax deduction for the company's 419(e)  contributions in the insurance policy.  In addition, assets in life insurance trusts are sheltered from creditors.

419(e) plans have complex rules that dictate the need for a third-party administrator to design a plan that strictly adheres to IRS regulations and to actuarially certify deductions made to the plan.

Professional groups and small business operations with strong cash flows are candidates for the 419(e).  For a medical office with two doctors and four employees, for example, contributions to this type of plan may range from $50,000 to about $250,000 annually.

EPT's 419(e) lead generation websites are available to licensed financial advisors and insurance agents with a valid life insurance license.

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