A Fully Insured plan is a defined benefit plan, and in most respects they are the same. The major difference between the two is that a Fully Insured plan is required to have all plan assets invested with an insurance company. The returns on these investments are guaranteed. However the returns are generally lower than the return one generally can expect from other investment types.
What are some of the benefits of a Fully Insured plan?
- Because the investment results are assumed to be lower, these plans generate very large deductible contributions.
- No market risk; the investment results are guaranteed.*
- Administrative cost savings because an actuarial certification is not required.
Who is a Fully Insured plan right for?
- Small businesses seeking large tax-deductions who have few (if any) employees other than the owners.
- Businesses that have stable and predictable income.
- Owners that are risk averse and seek guaranteed benefits without market volatility.
* Guarantees are based on the claims-paying ability of the issuing insurer