DEFINED CONTRIBUTION PLANS

1. DEFINED CONTRIBUTION PLANS Presented by: Mary Read, CPC, QPA National Director of Qualified Plan Marketing For Financial Professional Use Only. Not For Use With the Public.

2. DISCLOSURE This material is intended as a general discussion of qualified plan concepts and strategies. It is not intended as specific advice concerning any individual legal, tax or accounting matter. Alliance Benefit Group-Pentegra does not provide legal, tax or accounting advice. Any questions regarding your individual situation should be directed to your personal advisor on such matters. For Financial Professional Use Only- Not For Use With Public

3. TYPES OF RETIREMENT PLANS • Defined Contribution • Contribution is limited • Retirement benefit is unknown • Benefit depends on the amount of contributions made and any growth of plan investments • Profit Sharing • Money Purchase • 401(k) • Target Benefit • Contribution Limit • 25% of Participating Payroll • Allocation Limit • 100% of pay, maximum $50,000 For Financial Professional Use Only- Not For Use With Public

4. WHO WILL BENEFIT? Must we cover everyone? Yes No For Financial Professional Use Only- Not For Use With Public

5. ELIGIBILITY • Typically age 21 with 1 year of service. • Can be as long as 2 years (1 year for 401(k)) • Being Eligible does not affect status for a Traditional deductible IRA For Financial Professional Use Only- Not For Use With Public

6. PARTICIPATION • Actually being included in contributions • May exclude eligible employees • Must pass coverage test For Financial Professional Use Only- Not For Use With Public

7. PARTICIPATION • 70% Test • % of Non-highly Compensated Employees (NHCE) participating must be at least 70% of Highly Compensated Employees (HCE) participating Example Employees: 2 HCE 10 NHCE For Financial Professional Use Only- Not For Use With Public

8. CASE STUDY - INDUSTRIAL DESIGN, INC. This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ. For Financial Professional Use Only- Not For Use With Public

9. SIMPLIFIED EMPLOYEE PENSION (SEP) This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ. For Financial Professional Use Only- Not For Use With Public

10. SIMPLE-IRA Savings Incentive Match Plan for Employees This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ. For Financial Professional Use Only- Not For Use With Public

11. PROFIT SHARING - PAY BASED FORMULAS • Proportionate to Pay • Everyone gets the same percentage of pay (like SEP) • Permitted Disparity • Also known as Integration With Social Security • Can help a plan favor higher paid employees • Formula takes into account payments the employer already makes to Social Security • Sample formula • 5.7% of compensation above SS Wage Base, balance allocated in proportion to pay For Financial Professional Use Only- Not For Use With Public

12. Integrated Profit Sharing Plan Contribution This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ. For Financial Professional Use Only- Not For Use With Public

13. Pay and Age Based Formulas • Age Based • Allocations favor older employees • Favor groups where the employer is older than employees • Allocations based on projected benefits at a future retirement age • The fewer years until retirement, the more the allocation must be each year to accumulate the projected benefit For Financial Professional Use Only- Not For Use With Public

14. Age Weighted Profit Sharing Plan Contribution This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ. For Financial Professional Use Only- Not For Use With Public

15. New Comparability Profit Sharing Takes the concept of Age Based further • Allows for employees to be segregated into groups with different contribution rates • Allows the plan to test on projected benefits that are comparable instead of equal • Well suited to businesses where not all employees are younger than the owner or multiple owners are different ages For Financial Professional Use Only- Not For Use With Public

16. New Comparability Profit Sharing Contribution This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ. Contributions: Owners – 20% of salary; Employees 5% of salary For Financial Professional Use Only- Not For Use With Public

17. PS SSI NC AB Case Study Industrial Design, Inc. These examples are purely hypothetical and for illustrative purposes only. The examples shown here do not represent the actual results of any particular plan and your results likely will differ. For Financial Professional Use Only- Not For Use With Public

18. WHICH CLIENTS? How About New Clients? 30 million businesses comprised of 9.5 million incorporated businesses with less than 10 employees and 20.7 million unincorporated businesses • Business Owners • Profitable • Have cash flow • Approaching retirement • Could benefit from protection of assets • Could benefit from tax deduction • May already have a plan, but maybe not the best plan Government Census Statistics http://www2.census.gov/csd/susb/2006/usst06.xls http://www.census.gov/epcd/nonemployer/2006/us/US000.HTMhttp://www2.census.gov/csd/susb/2006/usst06.xls http://www.census.gov/epcd/nonemployer/2006/us/US000.HTM U.S. Department of Labor, U.S. Bureau of Labor Statistics, August 2007 National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2009 Update 2009 http://www.bls.gov/ncs/ebs/benefits/2009/benefits_retirement.htm For Financial Professional Use Only- Not For Use With Public

19. IN A PERFECT WORLD… • Ask the employer: • How much do you want to contribute? • Which employees do you want to include? • Which employees do you want to favor? • …within the law we can help design a plan that comes close to the client’s idea of “perfect” For Financial Professional Use Only- Not For Use With Public

20. ALLIANCE BENEFIT GROUP-PENTEGRA Training, custom plan proposals, prospecting and marketing materials are free. We are only a phone call away! Lori J. Carpenter Advisor Relationship Manager (800) 255-8678 Direct: 704.716.8596 lcarpenter@abgcarolinas.com Mary Read CPC, QPA National Director of Qualified Plans Marketing 802-477-2018 mread@abgpentegra.com • Outstanding Personal Service • Industry Experts • No Commission Splits • No Hidden Fees For Financial Professional Use Only – Not For Use With Public

21. CIRCULAR 230 DISCLOSURES • The above information is not intended or written to be used, and it cannot be used, by any person for the purposes of avoiding any penalty that may be imposed by the Internal Revenue Service. • In the event the advice is also considered to be a “marketed opinion” within the meaning of the IRS guidance, then as required by the IRS, please be further advised of the following:The above advice was written to support the promotion or marketing of the transactions or matters addressed by the written advice and, based on the particular circumstances, you should seek advice from an independent tax advisor. For Financial Professional Use Only- Not For Use With Public