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Maximum Tax Deductions with Guaranteed Retirement Income

Maximum Tax Deductions with Guaranteed Retirement Income.

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Maximum Tax Deductions with Guaranteed Retirement Income

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  1. Maximum Tax Deductions with Guaranteed Retirement Income OLA 1203 T 1008

  2. This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Clients and other interested parties to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.

  3. 412(e)(3) Fully Insured Plan • Guaranteed retirement benefits • Ideal for small business owners • Can maximize tax deductions

  4. What Is a Qualified Plan? • Provides retirement, disability, and/or death benefits • Must meet specific IRC requirements • Qualifies for tax-favored treatment • deductible contributions • tax-deferred growth • Plan cannot discriminate

  5. What Is a 412(e)(3) Plan? • A defined benefit qualified retirement plan • Funded exclusively with guaranteed insurance products • Exempt from minimum funding requirements • Contributions based on present value of future benefits • Life insurance provides family protection

  6. Traditional Defined Benefit vs.412(e)(3) Fully Insured Plan

  7. How a 412(e)(3) Plan Works • Funded exclusively with guaranteed insurance contracts • Contributions tax-deductible to employer • Contributions pay annuity and life insurance premiums • Plan assets grow federal income tax–deferred • Death benefit received in excess of cash value may be received income tax–free

  8. How a 412(e)(3) Plan Works

  9. Hypothetical Example: S Corporation—John Barrister Calculations provided by The Heritage Group, LLC

  10. Hypothetical Example: Tax Consulting Firm • Highly profitable • Consistent earnings • Owned by husband and wife • One salaried employee • Large number of independent contractors (not eligible to participate in the plan)

  11. Hypothetical Example: Tax Consulting Firm Calculations provided by Heritage Group, LLC, are presented herein for illustrative purposes only.Based on retirement age of 62.

  12. The 412(e)(3) Team • Financial professional • Third-party administrator • Professional advisors

  13. The Role of Your Financial Professional • Helps you define retirement objectives • Gathers employee census • Discusses contribution levels • Discusses with you and your professional advisors the appropriateness of 412(e)(3) plan

  14. The Role of the Third-Party Administrator • Develops suitable plan proposal • Helps prepare plan documents • Annual plan administration • calculates plan contributions • performs incidental benefit tests • prepares required reports • handles distributions

  15. The Role of YourProfessional Advisors • Help you develop realistic objectives • Prepare projections and conduct analyses • Help draft plan documents • Provide tax and legal advice

  16. Benefits of a 412(e)(3) Plan • Maximize contributions and deductions • Limit complexities of traditional defined benefit plans • Minimize market risk • Benefits can increase over time

  17. Who Can Benefit from a 412(e)(3) Plan? • Highly paid business owners and professionals • Small, closely held businesses • Depending on employee characteristics, some employers with larger employee groups • Businesses exhibiting financial stability • Owners preferring security over uncertainty Life insurance and annuity products issued by Transamerica Life Insurance Company, Cedar Rapids,IA 52499. All products may not be available in all jurisdictions.

  18. Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give tax or legal advice. This material is provided for informational purposes only and should not be construed as tax or legal advice. You should rely solely upon your own independent advisors regarding your particular situation and the concepts presented here. • Discussions of the various planning strategies and issues are based on our understanding of the applicable federal tax laws in effect at the time of presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not take into consideration the general tax and ERISA provisions applicable to qualified defined benefit retirement plans or the applicable state laws of clients and prospects. • Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of October 2008. • Transamerica Financial Life Insurance Company is authorized to conduct business in the state of New York. Transamerica Life Insurance Company is authorized to conduct business in all other states.

  19. Maximum Tax Deductions with Guaranteed Retirement Income OLA 1203 T 1008

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