Defined Contribution Plans and Tax Advantages

1. Defined Contribution Plans and Tax Advantages

2. Defined Contribution Plan • 401k profit sharing plan limited to $52,000 • Catch Up provisions $5,500 • SEP plan limited to $52,000 • SIMPLE plan limited to $12,000

3. Fully Funded Defined Contribution Plan Salary $260,000Full Salary Deferral Safe Harbor and Profit Sharing

4. Fully Funded Defined Contribution Plan Salary $134,000Full Salary Deferral Safe Harbor and Profit Sharing

5. Tax Savings in a 40% Bracket • $52,000 is fully deductible • 40% tax rate • $20,800 tax liability • $31,200 net cost

6. Life Insurance in a Defined Contribution Plan • 50 % of contributions to Whole Life policy • 25 % of contributions to Universal Life policy • 100 % of Aged Money • Rollover money • Accumulated over 2 years • Participant over 5 years

7. Micro(k)SM • Business where owners are the only eligible employees • 401(k) Plan without the complexity of discrimination testing • Less complexity = Lower fees

8. Upgrade from SIMPLE to Micro(k) • Many small business owners have a SIMPLE plan in place • Little or no administration involved • Many Investment options are available • No insurance option or Loan Provisions

9. Upgrade from SIMPLE to Micro(k) • Use a UL policy with $1 million death benefit • Use aged money for premium over the 25% rule – There is a $100,000 balance in the current SIMPLE • Compare the cost of UL to Term – stop paying at retirement age • Cash and insurance available at retirement

10. Upgrade from SIMPLE to Micro(k) Plan 45 year old business owner $12,000 annual - $100,000 account balance $1,000,000 DB needed

11. Upgrade from SIMPLE to Micro(k) Plan 45 year old business owner $12,000 annual - $100,000 account balance $1,000,000 DB needed

12. Safe Harbor • Business where there are owners and Eligible Employees • 401(k) Plan where salary deferral is primary concern • Additional employer profit sharing is possible

13. DASH • Business where there are owners and eligible employees • 401(k) Plan profit sharing plan • Different employee categories receive different levels of employer profit sharing contributions

14. Upgrade from Safe Harbor to DASH Plan • Small businesses may have a safe harbor 401k plan in place with either a matching contribution or a non-elective contribution for employees • They may be interested in increasing their retirement plan contribution but are concerned with the increased cost for employees

15. Upgrade from Safe Harbor to DASH Plan Salary SH Plan DASH • PTR 1 55 $260,00025,30052,000 • PTR 2 45 $260,00025,30052,000 • HCE 1 45 $150,000 4,500 7,500 • HCE 2 40 $125,000 3,750 6,250 • MGR 1 45 $ 75,000 2,250 3,750 • MGR 2 40 $ 65,000 1,950 3,250 • MGR 3 40 $ 55,000 1,650 2,750 • EMP 1 35 $ 50,000 1,500 2,500 • EMP 2 35 $ 35,000 1,050 1,750 • EMP 3 30 $ 35,000 1,050 1,750

16. Upgrade from Safe Harborto DASH Plan

17. Tax Savings in a 40% Bracket • $133,500 is fully deductible • 40% tax rate • $ 52,600 tax liability • $ 29,500 employee cost • $ 25,100 net tax savings

18. Getting a Design Study Complete a Retirement Plan Fact Finder FAX to Plan Design Team: 607.773.2007

19. Important Factors Who’s there? What do they have now? What’s their budget? Do they want Life Insurance?

20. SML Advanced Marketing Support Plan Consultation Agent Client & CPA Life Insurance Products & Service SAI Plan Documents Plan Administration Tax Reporting Advanced Plan Design Super Comp. DB & 412(e)(3) Conversions Cash Balance Plans We Do it All!