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412(i) and Lincoln Life

412(i) and Lincoln Life. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Richard Forcht, CLU, ChFC Regional Marketing Director Lincoln Financial Distributors. PROBLEMS. Demographics: Baby Boomers Economics: Market Cycle

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412(i) and Lincoln Life

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  1. 412(i) and Lincoln Life Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  2. Richard Forcht, CLU, ChFC Regional Marketing Director Lincoln Financial Distributors LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  3. PROBLEMS • Demographics: Baby Boomers • Economics: Market Cycle • Humanomics : Fear • Procrastination • Greed For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  4. NON-Solutions • Defined Contribution Profit Sharing Plans • Defined Contribution Pension Plans For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  5. LIMITED Solutions • SERP’s • Defined Benefit Pension Plans • § 412(i) For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  6. §412(i) Qualified Deferred Compensation • Tax Deductible Contributions Defined Benefit Age based • Guarantees • Mature Audiences For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  7. §412(i) • 50+ year old idea / legislation • Exempt from many § 412 rules • Must meet certain requirements For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  8. Requirements • Funded solely by annuity contracts or a combination of annuity contracts and life insurance policies • Level annual premiums • Benefit must be guaranteed • by the life insurance company • No participant loans For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  9. Advantages • Large tax deductible contributions • Fully insured & guaranteed benefits • Simplified administration • Easily understood For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  10. ADVANTAGES Deductible Contributions Annuity Maximum Age Only Life & Annuity 40 $89,431 $116,257 45 $125,494 $165,495 50 $192,428 $258,562 55 $249,481 $353,263 * Sample contributions only, actual contributions based on actual policy guarantees For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  11. ADVANTAGES Guaranteed Benefits • Fully insured benefits • Up to $2,885,931* lump sum at retirement • Up to $160,000* annual retirement income * Assuming pre-retirement earnings of at least $160,000 and normal retirement age For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  12. ADVANTAGES Simplified Administration Exempt from : • Minimum funding standard • Full funding limitation • Quarterly contributions • Schedule B actuarial certification • Assumption interpretations For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  13. DISADVANTAGES Not for every business! • Non discriminatory QP • Contributions are fixed and mandatory • No investment flexibility • No policy loans For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  14. SOLUTIONS Best fit • Established & highly profitable businesses • Mature owner(s) - 45+ • Conservative risk tolerance • Within 10 years of retirement • Few employees <15 For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  15. SOLUTIONS Case Study • 2 Doctors with a very profitable business • Ages 68 & 49 • UltraConservative • 5 years from retirement • No employees For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  16. SOLUTIONS Case Study • Each Doctor is 50% owner of PC • Each has $200,000 salary • Each wants to defer an additional $100,000 • For retirement in 5 years For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  17. SOLUTIONS Case Study / Plan Specs • Normal retirement Age 55 or 5 years • 109% of compensation for each year < 25 yrs • High 3 year average comp • 3% Interest assumption For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  18. SOLUTIONS Case Study Dr 68 Dr 49 Salary $200,000 $200,000 Contribution$100,035$99,197 Monthly Benefit $3,638 $2,748 Retirement Age 73 55 For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  19. SOLUTIONS Case Study Total plan cost $199,232 Tax savings @34% 67,739 Net after tax cost $131,493 For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  20. CAUTION • Speaking on a panel on aggressive tax practices at the annual Los Angeles Benefits Conference, senior officials from the Treasury Department and Internal Revenue Service said that they are giving “very high priority” to providing employee plan administrators and sponsors guidance regarding abusive insurance-funded defined benefit plans that misuse IRC section 412(i). For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  21. DISCLOSURE This presentation is for educational purposes only. It is not to be used with the public. It is intended to be accurate and authoritative in regard to the subject matter covered. It is presented with the understanding that neither The Lincoln National Life Insurance Company or its representation are not engaged in rendering legal or tax advice. Clients should be encouraged to seek the independent advice of a professional tax or legal advisor prior to making a tax-related investment decision. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  22. Michael O. Schulitz Life Insurance Liaison Lincoln Financial Distributors LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  23. The Lincoln Advantage • Third Party Administrators • Web-based diagnostic • No-comp reduction • Products Lincoln Retirement Benefit Annuity Lincoln WL-ICV Issued by The Lincoln National Life Insurance Company on policy forms LN815/LN816 and LN1790AA respectively. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  24. Third Party Administrators • 4 TPAs have already signed on • These TPAs have agreed to administer plans without splitting commissions • A process for signing up additional TPAs is in place LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  25. Web-based Diagnostic • Comprehensive plan illustration software - Not available on AWB • Extremely fast plan illustration turn around – seconds not weeks • All that is required to run illustration is an employee census • NAIC illustrations produced simultaneously with plan illustration LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  26. No Compensation splits • TPAs have agreed to provide admin-only support • Majority of competitors split cases with TPAs LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  27. Lincoln WL-ICV • Available in all states • Guaranteed interest rate of 4.5% • Excess interest credit and excess mortality credit whole life plan • Competitively priced for the 412(i) market LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  28. Lincoln Retirement Benefit Annuity • Individual flexible premium fixed annuity • Available in all states except NY & OR • Guaranteed interest rate of 3% to 1.5% depending on the state • Seven year surrender schedule from year one – not a new money schedule LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  29. Submission Process • New submission process that coordinates the issuing of annuity contracts and life insurance policies • Two new forms • Commission Disclosure • Hold Harmless • Be advised: New Business will only contact the producer – not the TPA LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  30. Producer receives 412(i) marketing kit Producer faxes or emails census to sales support team (goes directly to TPA if needs customized plan) Producer obtains 412(i) proposal Producer contacts TPA (if haven’t already) NB = New Business UW = Underwriting TPA = Third Party Administrator Producer gathers documents and disseminates • Annuities • Applications* / NB forms • NB cover sheet • MONEY may be sent at this time • Disclosure, Acknowledgement and Indemnity • Agreement (form 54321) • Qualified Retirement Plan - Compensation/ • Cost Disclosure (form 54322) • EPL Agreement (form 54323) • TPA • TPA Forms (based on TPA requirements) • If TPA is new to Lincoln they will have to go through • the due diligence process, contact sales support for • more information. • If TPA on application the TPA will need to be • licensed/appointed by Lincoln. • Life • Application / Illustrations / NB forms • COPY of NB cover sheet • NO MONEY is sent at this time • COPY of Disclosure, Acknowledgement and Indemnity • Agreement (form 54321) • COPY of Qualified Retirement Plan - Compensation/ • Cost Disclosure (form 54322) • COPY of EPL Agreement (form 54323) Hold for life UW (if applicable) Producer contacts Lincoln Retirement (Annuities) if UW produces different class/rating Normal UW process – (NB contacts producer with UW offer) If UW offer is different, Producer works with sales support/TPA to adjust life face, and annuity premium When offer is accepted producer contacts Lincoln Retirement (Annuities) Issue annuities to producer Producer sends materials to TPA to review Once issued, New Business sends to producer *Applications are unique for Annuities please reference application and instructions on CD or on website. Not applicable for LFA. Producer delivers package and gets life money and post-issue requirements signed LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  31. The Plan Diagnostic • Running illustrations • Advisor training • Issuing IDs and Passwords • 412(i) plan customization strategies LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  32. For Agent or Broker use only. Not to be used with general public. LM0306-0318.

  33. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  34. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  35. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  36. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  37. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  38. 412(i)CONTRIBUTION LEVELS Assumptions: Normal Retirement Age 65 Life Insurance allocation 50% Preferred Non-Smoker Annuity rate guarantee 3% Life Insurance guarantee rate 4.5% LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  39. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  40. For Agent or Broker use only. Not to be used with general public. LM0306-0318. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public

  41. Marketing Material • Marketing Folder • Client Brochure • Producer Brochure • Q&A • CD-ROM with forms, marketing presentations, and process support. LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

  42. THANK YOU Questions? LM0308-0415 For Agent or Broker Use Only. Not To Be Used With General Public.

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