To the contrary, this is the feature that makes them popular. A low rate means a high funding target, since they move in opposite directions. In turn, a high funding target requires high annual funding (and deduction). For businesses and/or individuals with high marginal tax rates, this can mean significant tax deferral. Hence, astute small business owners often are more than willing to accept low interest rates in combination with high tax relief. Instead of gains coming from uncertain market returns, they come from more certain tax relief.
Posted in: 412(e)(3) Plan Specific
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