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Outline of today’s discussion

Outline of today’s discussion. Who is Peachtree? What is LBP? Case Studies Action Steps. Who is Peachtree?. Peachtree LBP Administrator for LBP Program Finance company providing premium loan origination and loan servicing Independent SSO. Who is Peachtree?.

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Outline of today’s discussion

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  1. Outline of today’s discussion • Who is Peachtree? • What is LBP? • Case Studies • Action Steps

  2. Who is Peachtree? • Peachtree LBP • Administrator for LBP Program • Finance company providing premium loan origination and loan servicing • Independent SSO

  3. Who is Peachtree? • The Peachtree Family of Companies • Established in 1996 • 350+ Employees • Over $4 Billion in Committed Financing • Administer Over $2 Billion in Originated Assets • IPO March 2006 - LSE: PSF • Private November 2006 – DLJ/Credit Suisse

  4. What is LBP? • “Leveraged Bonus Program” • Individually Owned Retirement Plan • 3 Key Ingredients • After-Tax Dollars from EE • Tax Replacement Loan • Interest Paid by ER • Emulation of Retirement Arrangements • Focus on 401(k) Plans

  5. Why a 401(k) Plan? • Large, Untapped Market • 90% of Companies Have a 401(k) • 401(k) Challenges • 70% Have Testing Issues • Top-Heavy Compliance (HCEs) • Limited Solutions for Employers

  6. Traditional Options • Remain Top-Heavy • Continuous Testing Concerns • Refund Contributions to HCEs • Spend in other ways for HCEs • Create a “Safe Harbor” Plan • Permanently Ends Testing Concerns • Non-elective contribution (3%)

  7. LBP401(k) Plus Traditional Options • Is there a better choice?

  8. $15,000 401(k) Grows Tax Deferred Age 70½ RMDs Taxable Age 59½ Taxable % $15,000 LBP401(k) PlusSM Grows Tax Deferred $6000 (IRS) % $9000 $6000 (IRS) $6000 LBP® $9000 ANY AGE Tax-Free (if done properly)

  9. $15,000 401(k) Grows Tax Deferred Age 59½ Taxable Age 70½ RMDs Taxable $9000 $6000 (IRS) % $15,000 LBP® Grows Tax Deferred $9000 $6000 LBP® ANY AGE - Tax-Free (done properly) % Permanently Eliminate 401(k) Top Heavy Testing Issues

  10. $15,000 401(k) Grows Tax Deferred Age 59½ Taxable Age 70½ RMDs Taxable $9000 $6000 (IRS) % $15,000 LBP® Grows Tax Deferred $9000 $6000 LBP® ANY AGE - Tax-Free (done properly) x 10% $6,000 % Payroll: $5.0M 3% Non-elective 10 HCEs $60,000 $150K $144K

  11. LBP 401(k) PlusSM • For the Company: • Existing 401(k) Plan stays in place • Selective Participation • Permits maximum contributions for key executives • Deductible • Permanently eliminates testing issues at a fraction of the cost

  12. LBP 401(k) PlusSM • For the Participant: • Unlimited contributions • Tax deferred growth for retirement • Tax-favored income at retirement • Pre- and post-retirement death benefits

  13. Case Studies

  14. Case Study: LBP® vs. Safe Harbor • Business received 2006 Testing from the TPA • Plan failed HCE/NHCE Testing • $5.4 Million Payroll • 17 HCE’s • Company had used Safe Harbor to resolve testing issues (3% non-elective match)

  15. 2006 Highly Comp Group Avg. 8.79% 2006 Nonhighly Comp Group Avg. 2.18% “corrective action is needed” Case Study: LBP® vs. Safe Harbor

  16. Case Study: LBP® vs. Safe Harbor • Current Safe Harbor Plan: • $164,490 (3% non-elective) • Instead … utilize LBP 401(k) PlusSM: • $24,475 (year one)

  17. LBP 401(k) PlusSM vs. “Safe Harbor” Hurdle Rate: This figure is a corporation’s incremental cost of capital or required rate of return. LBP Indirect Savings: This reflects the incremental earnings for the particular year on the cumulative LBP Direct Savings (including prior incremental earnings), based on the company’s Hurdle Rate. LBP 401(k) Plus Cost: Bonus to executives for annual loan interest. In years 1and 6, this figure also includes the bonus to cover the LBP loan commitment fee. Loan interest rate: 12 Month LIBOR plus a fixed 1.95%. LBP Loan Commitment Fee: 2% charged in year 1 and 6 of the total loan amount expected over 5 years.

  18. LBP 401(k) PlusSM vs. “Safe Harbor”

  19. Case Study: 401(k) Enhancement • Peachtree LBPSM was approached by a company with a voluntary 401(k) plan. • Payroll of $62,000,000 • 120 Employees not able to participate at the maximum deferral amounts • Deferrals have been refunded the last 3 years because the plan failed the ADP test • “Safe Harbor” was not an option because of cost

  20. Case Study: 401(k) Enhancement • Original recommendation: • create a “safe harbor” plan • minimum cost: $1,860,000 (3% of payroll) per year • Instead … provide LBP® : • Cost: $212,640 year one

  21. LBP 401(k) PlusSM vs. “Safe Harbor” Hurdle Rate: This figure is a corporation’s incremental cost of capital or required rate of return. LBP Indirect Savings: This reflects the incremental earnings for the particular year on the cumulative LBP Direct Savings (including prior incremental earnings), based on the company’s Hurdle Rate. LBP 401(k) Plus Cost: Bonus to executives for annual loan interest. In years 1and 6, this figure also includes the bonus to cover the LBP loan commitment fee. Loan interest rate: 12 Month LIBOR plus a fixed 1.95%. LBP Loan Commitment Fee: 2% charged in year 1 and 6 of the total loan amount expected over 5 years.

  22. LBP 401(k) PlusSM vs. “Safe Harbor”

  23. The LBPSM “30-Day Plan” • Day 1: Introduction to LBP • Day 15: LBP Mechanics • Sales Process • Enrollment & Implementation • Administration • Day 30: Onsite Meetings • Client Presentations • Enrollment

  24. Day 15: LBP Mechanics

  25. Day 15: LBP Mechanics • Sales Process • Prospecting with LBP • Company Decision Cycle • Company Cost Analysis • Presumptive Closing Steps

  26. Day 15: LBP Mechanics

  27. Day 15: LBP Mechanics • Sales Process • Prospecting with LBP • Company Decision Cycle • Company Cost Analysis • Presumptive Closing Steps • Enrollment & Implementation • Steps in Process • Timeline • Peachtree’s Roll

  28. Day 15: LBP Mechanics • Sales Process • Prospecting with LBP • Company Decision Cycle • Company Cost Analysis • Presumptive Closing Steps • Enrollment & Implementation • Steps in Process • Timeline • Peachtree’s Roll • Administration • Technical Structure of LBP • How to work with Peachtree

  29. Action Steps • Identify 5 prospective businesses • Company has a 401k plan • Utilize Prospecting Call Script • Have you had Top-Heavy issues in the past or currently? • Have you refunded 401k contributions back to HCEs? • Utilizing or considering a “safe harbor” plan • Would you be interested in permanently eliminating Top-Heavy testing issues? • Utilize Napkin Pitch and Script • Call LBP for Support

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