Is There Still Life in These Plans?

1. Is There Still Life in These Plans? For producer use only. Not for presentation to the public. OLA 1290 0209

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. Anyone 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. For producer use only. Not for presentation to the public.

3. Why 412(e)(3) Now? • Uncertain economic climate • Clients leery of investing solely in stocks or bonds • Desire for guaranteed retirement income • Favorable Pension Reform: EGTRRA 2001 • compensation/contribution limit changes • no plan aggregation • no family aggregation For producer use only. Not for presentation to the public.

4. EGTRRA Increases Compensationand Benefit Limitations For producer use only. Not for presentation to the public.

5. What Is a Section 412(e)(3) Plan? • Defined benefit qualified retirement plan • Funded exclusively with guaranteed insurance products • Level annual funding is required • Plan benefits equal contract benefits • Exempt from usual defined benefit plan minimum funding requirements • Contributions based on present value of future benefits For producer use only. Not for presentation to the public.

6. Investment Options • Annuity-only option • Annuity and life insurance option • Contract selection does not change benefit • Life insurance adds family security For producer use only. Not for presentation to the public.

7. 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—which can help offset effects of inflation For producer use only. Not for presentation to the public.

8. Traditional Defined Benefit vs. 412(e)(3) Fully Insured Plan For producer use only. Not for presentation to the public.

9. Defined Benefit Plan vs.412(e)(3) Plan Comparisons Calculations provided by The Heritage Group, LLC. Assumes plan participant is 50 years old. Funding for maximum retirement benefit allowed at age 65.Participant’s compensation in all years is in excess of $245,000. For producer use only. Not for presentation to the public.

10. GATT vs. Lump Sum Monitoring • Limits imposed by Congress • Look at current IRS interest rates to determine presentvalue of annuity • Interest rates change annually • 412(e)(3) vs. traditional defined benefit plan—reach GATT limit earlier • Choice to annuitize 412(e)(3) or roll over lump sum depends on a variety of planning factors For producer use only. Not for presentation to the public.

11. Guaranteed Returns—Why Bother? • “Why should someone consider a guaranteedlife insurance policy and annuity vehicle for retirement?” • For Clients • Larger upfront tax deductions with guaranteed benefits • For Advisors • Possible opportunity for long-term money management For producer use only. Not for presentation to the public.

12. Transamerica’s Approach to a 412(e)(3) Plan Offers Planning Flexibility • Life insurance is no longer needed • Life insurance is needed • receive policy as plan distribution • roll life insurance policy into profit-sharing plan • purchase life insurance policy from profit-sharing plan • Change the policy to meet new objectives • buy spousal protection for estate planning • keep individual insurance protection For producer use only. Not for presentation to the public.

13. Life Insurance ProtectionNo Longer Needed • Plan Participant Retires or Separates from Service TransFreedom® II (Form AF715 101 186 104) is a flexible premium deferred fixed annuity issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499. Contract form and number may vary, and this contract may not be available in all jurisdictions. For producer use only. Not for presentation to the public.

14. When Life Insurance Is Needed • Plan participant Retires or Separates from Service—Receives the Policy as a Plan Distribution • Policy transferred as plan distribution • Income tax paid on fair market value of policy less taxable economic benefit For producer use only. Not for presentation to the public.

15. When Life Insurance Is Needed (Cont’d) • Plan Participant Retires or Separates from Service—Roll the Life Insurance Policy to a Profit-Sharing Plan (PSP) • Policy transferred directly to PSP • Not a taxable distribution For producer use only. Not for presentation to the public.

16. When Life Insurance Is Needed (Cont’d) • Plan Participant Retires or Separates from Service— Purchases the Policy from the Profit-Sharing Plan ® ® ® For producer use only. Not for presentation to the public.

17. TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond • Current company practice • ISWL policy can be surrendered • cash surrender value rolls into profit-sharing plan or IRA • For same net amount at risk, Transamerica may issue new second-to-die universal life policy • No evidence of insurability required on former plan participant For producer use only. Not for presentation to the public.

18. TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond (Cont’d) • Evidence required on spouse’s life • Owner can be irrevocable trust so death benefit avoids estate inclusion • Cost of insurance based on insured’s current age—subject to new surrender charges • New compensation • Offered by company practice TransSecure® II (Policy Form #1-18011108, #ICC08-180) and Transecure® II NY (Policy Form #3-18038108) are nonparticipating, limited payment, fixed premium, interest-sensitive, whole life insurance policies issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499 or Transamerica Financial Life Insurance Company, Purchase, NY 10577. Policy forms and numbers may vary, and these policies may not be available in all jurisdictions. In most states, in the event of suicide during the first two policy years, death benefits are limited only to the return of premiums paid. In Missouri, suicide is no defense to payment of benefits unless the Company can show that the insured intended suicide at the time of application for coverage. For producer use only. Not for presentation to the public.

19. TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond (Cont’d) • Buying Spousal Protection for Estate Planning For producer use only. Not for presentation to the public.

20. TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond (Cont’d) • Single Life (offered by company practice) • Available when policy is no longer part of 412(e)(3) plan and is surrendered • Available beginning the 8th policy year • Insured’s age and surrender charge period remain unchanged • May roll cash surrender value into profit-sharing plan or IRA • New premium must be paid to prevent policy lapse • New death benefit will be net amount at risk For producer use only. Not for presentation to the public.

21. The Role of a Third-Party Administrator • Develops suitable 412(e)(3) plan proposal • Assists in preparation of plan documents • Annual administration • calculates plan contributions • performs incidental benefits testing • prepares required reports • handles distributions For producer use only. Not for presentation to the public.

22. Planning Considerations • There is a huge tax bill accruing on the backside of the 412(e)(3) plan—all we’re doing is deferring taxes For producer use only. Not for presentation to the public.

23. Planning Considerations (Cont’d) • What makes Transamerica’s approach to Section 412(e)(3) plans safer than those offered by the competition now that the IRS issued regulations that will change the valuation of life insurance policies? For producer use only. Not for presentation to the public.

24. IRS Guidance on Valuationof Life Insurance • Valuation • Notice 2005-25 • Modifies and supersedes 2004-16 • Provides guidance on fair market value oflife insurance policies • Provides safe harbor formula For producer use only. Not for presentation to the public.

25. Who Might Benefit from a412(e)(3) Plan? • The best candidates for a 412(e)(3) plan might be: • Highly paid business owners and professionals: • looking to maximize tax deductions • who can make a multiple-year commitment; and/or • who prefer security and guarantees over a fluctuating stock market • Smaller, closely held businesses • Companies with few or no common law employees • S corporation owners with W-2 salary • Independent contractors • Companies with larger employee groups wishing to create definedbenefit “carve-out” plans For producer use only. Not for presentation to the public.

26. 412(e)(3) Summary • Enhanced retirement benefits • Enhanced contributions/deductions • Enhanced security For producer use only. Not for presentation to the public.

27. Professional Advice • Professional advice is critical • Tax, ERISA, and legal counsel • Risk/benefit analysis • Financial projections • Careful drafting For producer use only. Not for presentation to the public.

28. Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give ERISA, tax, or legal advice. This presentation is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here. • Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this 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 defined benefit retirement plans or the impact of applicable state laws on 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 liability with respect to it. This information is current as of February 2009. For producer use only. Not for presentation to the public.

29. Is There Still Life in These Plans? For producer use only. Not for presentation to the public. OLA 1290 0209