What is the minimum funding standard for a Section 412(e)(3) plan?

The minimum funding standard for a Section 412(e)(3) plan centers around the requirement that these plans are often designed for specific types of funding arrangements, typically involving insurance contracts or certain guaranteed investment products. These plans do not require the same level of complex funding calculations that other types of pension plans may have, primarily because they are backed by the insurance policies that provide guaranteed benefits.

In this context, the correct choice indicates that minimum funding standards under Section 412(e)(3) only come into play when there is an outstanding loan from the plan. This reflects the unique nature of these plans in that they often hold stable, insured assets, thus simplifying the funding requirements. When loans are involved, the plans must adhere to specific minimum standards to ensure that they can meet obligations without jeopardizing the retirement benefits of the participants.

The other options refer to requirements that are not aligned with the inherent nature of Section 412(e)(3) plans, which focus on simplicity and the security provided through insurance contracts. These plans are typically shielded from more complex funding requirements unless a loan complicates the scenario.