(FORTUNE Small Business) – If you've heard fellow entrepreneurs talking about their 412(i) lately, you can be forgiven for thinking it might be a new sports car. In fact, the 412(i) is far more mundane--but a better bet if you're behind on your retirement savings. Allowed under IRS tax code section 412, it's a defined-benefit plan that lets businesses make supersized contributions in exchange for a guaranteed retirement income for the owner and employees.

The plans have been around since the 1970s, but they've come into vogue only recently, thanks in part to the pounding most investors took during the tech bubble. That has left entrepreneurs in their 40s and older scrambling to sock away money. About 50 insurance companies now offer 412(i) plans, a tenfold increase since late 1999, according to estimates by Hartwood Group, a 412(i) administrator in La Jolla, Calif.

The IRS recently relaxed the rules for such plans. Under the current arrangement a business can contribute between $100,000 and $300,000 a year--the amount varies depending on the ages, incomes, and years of service of those covered. But even at the low end, $100,000 is better than the $40,000 cap under a regular profit-sharing plan or 401(k). As with other retirement investments, the contributions are tax deductible. So if your business is in the 40% tax bracket, an annual $100,000 contribution will save it $40,000 a year in taxes.

The tradeoff is that the money must be invested conservatively, in whole-life insurance policies and annuities, with a set return of 2% to 4% that is guaranteed by the insurance company. No matter how hot the Nasdaq gets, you can't switch over to stocks or mutual funds. At retirement, you may take the annual payments (capped at $165,000 a person in 2004) or an equivalent lump sum (which can be rolled into an IRA), and the money is taxed at your ordinary income tax rate. Annual fees to administer the plans range from $1,000 to $2,500.

Is a 412(i) right for you? The profile is fairly specific. There's no age restriction, but it's best if you're 45 or older and have five or fewer employees. Younger than that and you're better off in a zippier investment. A bigger staff and the cost to cover each employee becomes prohibitive (and by law you must include everybody). Another factor to consider: You have to make the contribution every year, no matter how your business is doing. Miss a payment and you risk having the insurance contracts default.

The plans are also difficult for novices to evaluate. To protect yourself and your company, you'll want advice from both a tax professional--not one who is selling the plan--and a 412(i) specialist from a reputable insurance company or pension administrator. Work only with financially strong institutions. AIG, Mass Mutual, and Pacific Life all get the highest marks from rating agency A.M. Best, though other established firms, such as New York Life and Principal Financial, have recently started offering 412(i)s.

Finally, beware of inexperienced agents--they may not even know what they're selling. Last November, Leon Smith, 60, an actuary with Matthews Benefit Group in St. Petersburg, was hired to give an independent opinion on a plan that was clearly labeled "412(i)." He found that it was actually an entirely different type of plan that contained hidden fees. "Neither the client nor the insurance rep who was marketing it realized that it didn't qualify as a 412(i)," says Smith.