Course Name: New Dynamics in Qualified Plans Post-Pension Protection Act of 2006

Transcription

1 Course Name: New Dynamics in Qualified Plans Post-Pension Protection Act of 2006 Speakers: Zak Kenne, Fox Lalonde & Kenne John Lalonde, Fox Lalonde & Kenne Course Description: This session gives interested professionals an overview of the Pension Protection Act of 2006 (PPA) with respect to qualified plans. It examines the impact PPA has on qualified plan designs both at the employer and participant level (i.e. the elimination of the IRC 404(a)(7) contribution restrictions). The session covers the impact on tax deductibility for calendar year plans and plan years that overlap tax years; IRC 404(a)(6). Discussion will also cover both IRC 415(b)(1)(a) and IRC 415(c)(1)(a) benefits and allowable contributions from the perspective of both PBGC plans and non-pbgc plans under the new law, with emphasis on incidental benefits and highlighting the utility of IRC 401(h), a post-retirement individual medical/dental reimbursement plan. Learning Objectives: Participants will learn what happened and the impact on retirement/tax planning under Pension Protection Act of 2006: The changes in tax law applicable to PPA (lecture); IRC 404(a)(7); How to apply the changes in the tax law to the individual client situation/goals; How to customize the qualified plan design to fit the client objectives; default designs maximizing owner/key contributions IRC 415 and 404(a)(6), and minimizing the required employee contribution; The new IRC 415 limits and how to pre-fund future colas; About 401(h) plans, a tax trifecta: a. tax deductible plan contributions, b. tax exempt earnings, and c. tax free payout under IRC Category: Prerequisites: Technical None

2 NEW DYNAM I CS I N QUALI FI ED PLANS Post PPA 2006 The Super 401k P lan featuring I R C 401h Benefits Post-retirement Individual Medical Expense Reimbursement Benefits - M ay 12 th I ntercontinental Dallas Hotel Presented by Fox Lalonde & K enne, Enrolled Pension Actuaries 2017 All Rights Reserved

3 HOW COMPLICATED IS THIS QUALIFIED PLAN STUFF? KNOWING BASIC QUALIFIED PLAN DESIGN RULES

4 The Super 401k Plan Design Introducing & Featuring IRC 401h PRIMER Benefits SMALL REMINDERS: You can type in questions at any time. FL&K has or will provide a comprehensive Plan Design Brief, including: Fiduciary Summary (Law; Resources & Commentary) IRS on point manuals; Current FDLs Inclusive of 401(h) issued to FL&K Clients (redacted); Current Favorable PLR re: 401(h), and Third Party References from: CCH; TRI Pension Services, and CPA Certification of Technical Accuracy from NASBA member All of the above available upon request. QUALIFIED PLAN DESIGN MAXIM

5 IRC 401(h) Post-retirement Individual Medical Expense Reimbursement Benefit 2017 All Rights Reserved WHO IS FOX LALONDE AND KENNE? Fox Lalonde & Kenne AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES ASPPA Qualified Plan Consultants, Enrolled Pension Actuaries & TPAs Independent, Fee Only, National, Actuarial & Administrative Practice Servicing Qualified Plans in 36 states with service representatives in NY, OH, IN, IL and CA; See Our Website WE ARE GOING TO DICUSS THE IMPACT OF PPA 2006 ON POST PPA QUALIFIED PLAN DESIGNS You ll Know HOW We Calculate the Max Contributions & How to Best Apply the Rules for Your Client s Benefit

6 The Super 401k Plan Design featuring IRC 401h WHAT IS FL&K s AUTHORITY? 2017 All Rights Reserved AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES -ASPPA FL&K Authority: The IRS and DOL consider Enrolled Actuaries to be QP Experts The IRS requires and relies on FL&K s ANNUAL Actuarial Certifications for the Advanced Plan Designs

7 2017 All Rights Reserved WHAT IS Fox Lalonde & Kenne s EXPERIENCE? AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES -ASPPA FL&K Authority: PRINCIPALS COMBINE OVER 100 YEARS QP EXPERIENCE THE FL&K TEAM Qualified Plan Consultants, Enrolled Pension Actuaries & TPAs Plus, PROFESSIONAL ADVISORS in 36 STATES

8 IRC 401(h) Post-retirement Individual Medical Expense Reimbursement Benefit 2 Material Financial Issues for Clients? 2017 All Rights Reserved Fox Lalonde & Kenne AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES ASPPA Qualified Plan Consultants, Enrolled Pension Actuaries & TPAs Independent, Fee Only, National, Actuarial & Administrative Practice Servicing Qualified Plans in 36 states with service representatives in NY, OH, IN, IL and CA; See Our Website Here s What Client s and their Advisors TELL US: 1. Company Owners are Paying Way Too Much in Combined TAX 2. Their Retirement Plan WILL NOT Provide Adequate Retirement $$$ Fund for either the Company Owners or the other Plan Participants Just DO THE Status Quo 401(k) MATH. It Doesn t Cut IT!!!!

9 Boilerplate NEW DYNAMICS IN QUALIFIED PLANS Post PPA All Rights Reserved THE STATUS QUO CURRENT 401(k) PLAN RETIREMENT??? TAX DEDUCTIBILE CONTRIBUTIONS Tax Burden!!! Conventional 401K PS Plan Status Quo Your/Our Competitor s World Age 401k only 401k PS $24,000 $60,000 Safe Harbors $24,000 $60,000 Hidden Fees $24,000 $60,000 Loans $18,000 $54,000 Hardship $18,000 $54, , (k) Plans; 100 Million Participants Safe Harbor 401(k) vs. Reward Based 401(k) Contributory, Regulatory and Fiduciary Bias to EEs vs. Owners

10 IRC 401(h) Post-retirement Individual Medical Expense Reimbursement Benefit 2017 All Rights Reserved Clients See and way too many Feel the $$$ Problems Fox Lalonde & Kenne AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES ASPPA Qualified Plan Consultants, Enrolled Pension Actuaries & TPAs THE CLIENTS ARE RIGHT The Average Company Owner & HCEs Paid 40% to 70% in Combined Tax Federal, State, Local Income Tax, Payroll Tax (FICA), RE, Sales, etc. Looking Forward to Capital Gains and Estate Taxes Average NRD <$220K; PRIME Health Costs $160K-$250K+ and Our Social Security System is Broke

11 IRC 401(h) Post-retirement Individual Medical Expense Reimbursement Benefit 2017 All Rights Reserved FL&K s Response Fox Lalonde & Kenne AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES ASPPA Qualified Plan Consultants, Enrolled Pension Actuaries & TPAs THE CLIENTS ARE RIGHT Aver. NRD <$220K; Health Costs $160K-$250K+ The Average Company Owners Paid 40% to 70% in Combined Tax Federal Income Tax, State Tax, Local Payroll Tax, FICA, RE, Sales, etc. FL&K Wrote It s Own Custom Proposal & Valuation Systems Addressing Retirement Income & Offsetting PRIME Costs Acquired a Plan Document Systems that Allows us to CUSTOMIZE each Plan to Plan Sponsor Specifications

12 The Super 401k Plan Design featuring IRC 401h 2017 All Rights Reserved LEARNING THE RULES DESIGN DICTIONARY WE NEED TO SPEAK THE SAME LANGUAGE COURSE SPECIFIC TERMINOLOGY & DEFINITIONS (9) 1. SUPER 401(k) PLAN DESIGN = COMBO DEFINED BENEFIT (DB) + DB Incidentals + DEFINED CONTRIBUTION (401(k) + Profit Sharing) 2. DEFINED BENEFIT (DB) AND DEFINED CONTRIBUTION (DC) PLANS: Pension, Cash Balance, + Incidentals + 401(k) + PS 3. PENSION PROTECTION ACT OF 2006 PPA IRC 415 LIMITS: STATUTORY CONTRIBUTION MAXIMUMS 5. AGGREGATED BENEFITS DB INCIDENTALS (Cash Aggregates/Testing) IRC 401(h) PLANS: PRIME REIMBURSEMENT PLANS (PRIMER) PRE-COLA ACCOUNTS: INSURED PREMIUM CASH ACCOUNTS

13 The Super 401k Plan Design featuring IRC 401h 2017 All Rights Reserved LEARNING THE RULES DESIGN DICTIONARY WE NEED TO SPEAK THE SAME LANGUAGE COURSE SPECIFIC TERMINOLOGY & DEFINITIONS (9. Con t) 6. TAX ACCOUNTING METHOD(s) The Plan Sponsor Must Choose for Tax Deductibility Purposes the TAX YEAR in which the PLAN YEAR: 1) BEGINS, 2) ENDS OR 3) RATIO for the two. IRC 404(a)(6) 7. DOUBLE-UP = OCCURS WHEN 2 PLAN YEARS BEGIN IN THE SAME TAX YEAR; the TAX DEDUCTION IS THE SUM OF THE TWO PLAN YEARS, plus the cushion. 8. CUSHION = 150% of the NORMAL DB PLAN CONTRIBUTIONS 9. BAPCPA 2005: PROTECTS QUALIFIED PLAN ASSETS from CREDITORs FEDERAL BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT of 2005

14 BOILERPLATE NEW DYNAMICS IN QUALIFIED PLANS Post PPA 2006 THE STATUS QUO 2017 All Rights Reserved CURRENT 401(k) PLAN TAX DEDUCTIBILE CONTRIBUTIONS Conventional 401K PS Plan Status Quo Your/Our Competitor s World Age 401k only 401k PS $24,000 $60, $24,000 $60,000 Safe Harbor $24,000 $60,000 HIDDEN FEES Loans & Hardship $18,000 $54, $18,000 $54, , (k) Plans; 100 Million Participants Safe Harbor 401(k) vs. Reward Based 401(k) Contributory, Regulatory and Fiduciary Bias

15 SNEAK PREVIEW OF DESIGN RESULTS VS. STATUS QUO 2017 All Rights Reserved COMPARE TAX DEDUCTIBLE PLAN CONTRIBUTIONS COMBINED QP DESIGN LIMITS Super 401k Plan Design Your Competitive Advantage Age Super 401k Plan Yr. 1 Double-up* $375,000 - $500,000+ $836,500 to $1.15MM $305,000 - $375,000+ $682,000 to $850, $260,000 - $350,000+ $532,500 to $750, $225,000 - $260,000+ $418,500 to $524, $165,000 - $225,000+ $331,500 to $412,500 *Double again with Spouse; 60%+ 2 nd Year & Thereafter 50K Plans; 40 MM Participants RE: 2006 QP LAW CHANGE; WHO BENEFITS? OUR CLIENTS!!! Midwest Heart Surgeon; NY Financier

16 Post-retirement Individual Medical Expense Reimbursement Benefit So How Did We Get from A to B 2017 All Rights Reserved We Know What Happened? THE LAW CHANGED QP RULES CHANGED Thank you GB 43 The Pension Protection Act of 2006 Materially changed the Qualified Plan Landscape by removing the impact of IRC 404(a)(7) 1. IRC 404(a)(7) limited combined plan contributions to 25% of Eligible Compensation GONE!!!

17 The Super 401k Plan Design featuring IRC 401h 2017 All Rights Reserved THE IRS CODE QP RULES Post-PPA 2006 IRC CODE CITES SPECIFIC TO THE SUPER 401(k) PLAN DESIGN 1. IRC 404(a)(7) is Gone!!! IRC 415 COLA Limits Set at : IRC 415 (b)(1)(a) INCREASED to $215,000 from $210,000; Projected Monthly Benefit (PMB) $17,916.67/month Max Optional/Allowable Death Benefit 100X PMB 23 COLA INCREASES over 30 YEARS (13 OVER 17 YRS) from $90K TO $215K (>238%) IRC 415 (c)(1)(a) INCREASED to $54,000 < 50 YRS OLD Plus, Add l $6,000/mo. Catch Up to $60, YRS OLD 13 COLA INCREASES over 17 YEARS from $30K TO $54K (180%) ACTUARIES KNOW PENSION FUNDING IS TYPICALLY OBSOLETE DAY 1

18 2017 All Rights Reserved FL&K Responds with the SUPER 401(k) Plan Design The SUPER 401(k) is an Advanced Combined QP Design Response to the most Material Post-Retirement $$$ Issues RETIREMENT INCOME AND HEALTH CARE COSTS It features an IRS Actuarially Certified Cash Balance (IDPs) DB Pension, w/optional Incidentals (add up to 133% of the otherwise max contribution) 401(h) Post-retirement Medical Reimbursement, and Pre-COLA Account Contributions. IRS s Larry Isaacs and Linda Marshall (Equivalency) Plus, DC Plan(s) Before We Look at DC Plans Let s 1 ST Look at 401(h)

19 Increased Benefits THE AGGREGATED BENEFIT Optional/Allowable Add-on Incidental Benefits: Only Two: 401h and/or Pre-COLA SIMPLE CALC: THE MAX RETIREMENT CONTRIBUTION/3 TWO EQUALLY TALENTED ACTUARIES = YOU WIN! IRC 401(h) = P R I M E R BENEFITS Post Retirement Individual Medical Expense Reimbursement TESTING ISSUES: Benefits, Rights & Features (BRFs); Policies & Procedures IRS s Larry Isaacs & Linda Marshall; FL&K s Zak Kenne CASH is the UNIVERSAL EQUIVALENT; AB = CASH (A Mini Cafeteria Plan) Individual Participants choose the Aggregated Benefit that best suits their needs subject to BRFs and Policies & Procedures; the default is IRC 401(h). 401(h) is a Defined Benefit Incidental; Pre-COLA = IRC 415(b)(1)(A) States the Maximum Benefit; Prefund COLAs, HOW? No Min Death Benefit; Max 100X PMB NOTE: 401(k) PS is a DC Plan Can t Have a 401(h) Account KNOW THE RULES, WORK AS A TEAM = EVERYONE WINS!!!

20 The Super 401k Plan Design featuring IRC 401h WHAT IS FL&K s SUPER 401(k) PLAN? 2017 All Rights Reserved 2017 All Rights The SUPER 401(k) is an Advanced Combined QP Design featuring an IRS Actuarially Certified: Cash Balance + Incidentals = 401(h) + Pre-COLA PLUS, 401(k) and/or Profit Sharing Plan, and often, an Employee Only Reward Based 401(k) Plan (Employer s Love Reward 401k) FL&K has: Multiple Current FDL s issued by the IRS Inclusive of FL&K s Combined CB with 401(h) BE ADVISED, there are: Very favorable and Current PLRs Re: 401(h)

21 The Super 401k Plan Design featuring IRC 401h WHAT IS FL&K s SUPER 401(k) PLAN? 2017 All Rights Reserved The SUPER 401(k) is an IRS Actuarially Certified Combined QP Design featuring up to 4 Qualified Plans and up to 2 to 3 QP Trusts Cash Balance + 401(h) + Profit Sharing + 401(k)PS Plan w/combined Plan Contributions Totaling 3X to 20X The Stand-alone 401(k) PS Contributions of $54K-$60K SUPER 401(k) Plan Contribution = $165K to $1 MM+ ANNUALLY

22 Super 401(k) Plan Design vs. Status Quo 401(k) 2017 All Rights Reserved PPA 2006 = MATERIAL CHANGES IN QP LAW COMPARE TAX DEDUCTIBLE PLAN CONTRIBUTIONS A. 401k PLAN $$$ LIMITS vs B. COMBINED QP DESIGN LIMITS Conventional 401K PS Plan Status Quo Your Competitor s World Super 401k Plan Design Your Competitive Advantage Age 401k only 401k PS Super 401k Plan Yr. 1 Double-up* $24,000 $60,000 $375,000 - $500,000+ $836,500 to $1.15MM $24,000 $60,000 $305,000 - $375,000+ $682,000 to $850, $24,000 $60,000 $260,000 - $350,000+ $532,500 to $750, $18,000 $54,000 $225,000 - $260,000+ $418,500 to $524, $18,000 $54,000 $165,000 - $225,000+ $331,500 to $412,500 CRISIS = OPPORTUNITY *Double again with Spouse; 60%+ 2 nd Year & Thereafter 650K 401(k) Plans; 100 MM Participants 50K Plans; 40 MM Participants RE: 2006 QP LAW CHANGE; WHO BENEFITS? CLIENTS FOR SURE.

23 Why are you here? CPAs = Tax & Accounting Experts You Know those Answers by Heart or Where to Get Them QP Rules Only Generally, so that s Our Focus. WHY? Professional Service Providers as a Rule want to: 1. Help Clients Succeed (Reduce Taxes & Asset Protection); 2. Retain Clients; Expand and/or Improve Our Client Base 3. Give Their Practice & Clients a Competitive Advantage. KNOWING QUALIFIED PLAN (QP) RULES DOES ALL THREE Case Examples: Steve, CPA; Barry (Advisor) & Dave (Client); Jack and the Heart Surgeon 1 st FL&K QP DESIGN PREMISE: CLIENTS DESERVE SOMETHING BETTER

24 Start with NEW DYNAMICS IN QUALIFIED PLANS Post PPA All Rights Reserved Post-PPA 2006 IRS RULES 1. IRC 404(a)(7) is Gone IRC 415 LIMITS: IRC 415 (b)(1)(a) INCREASED to $215,000; Projected Monthly Benefit (PMB) $17,916.67/month Max Optional/Allowable Death Benefit 100X PMB NOW Let s Calculate a Max Super 401(k) PENSION CONTRIBUTION FOR A 50 YR. OLD Social Security Says Life Expectancy for a 62 year old is 20 years Providing a Life Annuity (20 years) at 5% Requires $2.75 MM $165,000 over 12 years at 5% = $2.75 MM = Pension Contribution

25 Post-PPA 2006 IRS RULES 2017 All Rights Reserved IRC CODE CITES SPECIFIC TO THE SUPER 401(k) PLAN DESIGN 1. IRC 404(a)(7) LTD COMBO PLAN CONTRIBUTIONS TO 25% of COMP IRC 415 LIMITS: IRC 415 (b)(1)(a) INCREASED to $215,000 from $210,000; Projected Monthly Benefit (PMB) $17,916.67/month Max Optional/Allowable Death Benefit 100X PMB 3. IRC 401(h) BENEFITS: (PRIMER) POST-RETIREMENT INDIVIDUAL MEDICAL EXPENSE REIMBURSEMENT a. TAX DEDUCTIBLE PLAN CONTRIBUTIONS b. TAX EXEMPT EARNINGS c. TAX FREE PAYOUT UNDER IRC d. AN INCIDENTAL PENSION BENEFIT e. DOES NOT VEST PRIOR TO NRD OR PERMANENT DISABILITY ABOUT THE TAX DYNAMICS AND BENEFITS of IRC 401(h) PLANS, A TAX TRIFECTA: 1. TAX DEDUCTIBLE PLAN CONTRIBUTIONS 2. TAX EXEMPT EARNINGS, AND 3. TAX FREE PAYOUT UNDER IRC

26 2017 All Rights Reserved IRS QUALIFIED PLAN RULES IRC CODE CITES SPECIFIC TO THE SUPER 401(k) PLAN DESIGN 1. IRC 404(a)(7) is Gone IRC 415 LIMITS: IRC 415 (b)(1)(a) = $215,000 Projected Monthly Benefit (PMB) $17,916.67/month 3. Aggregated Benefits = IRC 401(h) and Pre-COLA Cash Accounts NOW CALCULATE the AGGREGATED BENEFIT for a 50 YR. OLD $165,000 over 12 years at 5% = $2.75 MM Aggregated Benefit = 1/ 3 of the Pension Contribution $55,000 = the Allowable Aggregated Benefit Contribution $220,000 = Pension Contribution + Aggregated Benefit The AB is 25% of the Total Pension Contribution

27 2017 All Rights Reserved IRS QUALIFIED PLAN RULES IRC CODE CITES SPECIFIC TO THE SUPER 401(k) PLAN DESIGN 1. START with 2017 IRC 415 LIMITS: IRC 415 (b)(1)(a) INCREASED to $215,000 from $210,000; Projected Monthly Benefit (PMB) $17,916.67/month Max Optional/Allowable Death Benefit 100X PMB 2. IRC 404(a)(7) LTD COMBO PLAN CONTRIBUTIONS TO 25% of COMP 3. IRC 401(h) BENEFITS: (PRIMER) Aggregated Benefits = 401(h) and Pre-COLA Cash Accounts ADD the DC PLAN(s) CALCULATE the COMBINED DB+AB+DC for a 50 YR. OLD $165,000 = the DB over 12 years at 5% = $2.75 MM Aggregated Benefit = 1/ 3 of the Pension Contribution $ 55,000 = the Aggregated Benefit Contribution $220,000 = Pension Contribution + Aggregated Benefit $ 60,000 = Max 401(k) + Profit Sharing $280,000 = DB+ AB + 401(k) + PROFIT SHARING

28 2017 All Rights Reserved IRS QUALIFIED PLAN RULES SPECIFIC RULES RE: THE SUPER 401(k) PLAN DESIGN 1. START with 2017 IRC 415 LIMITS: IRC 415 (b)(1)(a) INCREASED to $215,000 from $210,000; Projected Monthly Benefit (PMB) $17,916.67/month Max Optional/Allowable Death Benefit 100X PMB 2. IRC 404(a)(7) LTD COMBINED PLAN CONTRIBUTIONS TO 25% of COMP 3. IRC 401(h) PLANS:(PRIMER) POST-RETIREMENT INDIVIDUAL MEDICAL EXPENSE REIMBURSEMENT QP Max Contribution Design Rules Allow a DB Cushion of 50% ESTIMATE the 2 nd Yr. Contribution w CUSHION 2 nd Yr. Pension Contribution ($165K + 3% ) = $170,000 Pension 50% = $ 85,000 2 nd Yr. CB w Pension Cushion = $247,500 1/ 3 Aggregated Benefit = $ 82,500 2 nd Yr. Pension Contribution w Cushion = $330,000

29 2017 All Rights Reserved IRS QUALIFIED PLAN RULES ADD L IRC RULES SPECIFIC TO THE SUPER 401(k) PLAN 1. START with 2017 IRC 415 LIMITS: IRC 415 (b)(1)(a) INCREASED to $215,000 from $210,000; 2. IRC 404(a)(7) LTD COMBINED PLAN CONTRIBUTIONS TO 25% of COMP 3. IRC 401(h) PLANS:(PRIMER) 4. IRC 404(a)(6) CHOICE OF THE TAX ACCOUNTING METHOD PLAN CONTRIBUTIONS MADE FOR PLAN YRS THAT OVERLAP THE TAX YR. CHOICE = TAX YR IN WHICH THE PLAN YR BEGINS, ENDS OR RATIO IRC 446(e) CHANGE in ACCOUNTING METHOD NOW CALCULATE the DOUBLE-UP CONTRIBUTION $280,000 1 ST Yr. Contribution with Cushion $444,000* 2 nd Year Contributions (MAX CB + AB +DC) $724,000 TOTAL DOUBLE-UP CONTRIBUTION *$60K + 54K = $114K + $330,000 (CB with Cushion + Aggregated Benefit)

30 2017 All Rights Reserved CASE STUDIES SUPER 401(k) PLAN DESIGN SPECIFICS a. MAXIMIZE OWNER/KEY CONTRIBUTIONS TO IRC 415 LIMITS, and b. UTILIZE IRC 404(a)(6) TAX ACCOUNTING c. MINIMIZE REQUIRED EMPLOYEE CONTRIBUTIONS TO THE OWNER S PLANS PLAN DESIGNS THAT REACT TO CHANGES IN CASH FLOW d. MATCH REVENUES TO EXPENSES in the Proper Period e. PENSION CONTRIBUTIONS TO KEYS ONLY and at the KEYS Option Employees selected by the KEYS f. FLEXIBLE and DISCRETIONARY PENSION CONTRIBUTIONS Forget the Horror Stories

31 The Super 401k Plan Design featuring IRC 401h All Rights Reserved KNOWING ALL THE RULES CASE STUDY MAX OWNERS PYE Earned DB Cash DC PS Aggregated Benefits Income Balance 401K 401h Pre-COLA QP Totals (W-2 or SE) $0 to $7,950 (3%) $0 to $0 to $7,950 to Owner $265,000 $395,000 to $59,000 $38,600 $126,667 $580,667 HCE 120, ,000 (5%) 1, ,000 EE 30, ,250 (7.5%) 1, ,250 EE2 25, ,875 1, ,875 EE3 25, ,875 1, ,875 EE4 50, , ,750 S/T 250, ,750 4, ,750 Totals: $515,000 $395,000 $74,750 $38,600 $131,667 $601,417 % To Owner 100% 71.2% to 78.9% 81.7% 99.5% 96.55% The CB Plan is ALWAYS 100% Owner Pristine Solely at the Owner s Discretion KNOW THE OPTIONS; HOW THINGS WORK; COMBINING PLANS

32 All Rights Reserved KNOWING ALL THE RULES CASE STUDY OWNER S TARGET DESIGN to the CLIENT s PRIORITIES EARNED CASH 401K AGGREGATED BENEFIT QP INCOME BALANCE PS 401h Pre-COLA TOTAL (W-2/SE) $0 to $7,950 to $0 to $0 to $7,950 to Owner $265,000 $275,000 $38,900 $20,100 $66,000 $400,000 HCE 120, , ,500 EE1 30, , ,750 EE2 25, , ,375 EE3 25, , ,375 EE4 50, , ,250 S/T 0 15,750 2, ,250 Totals: $515,000 $275,000 $54,650 $22,100 $66,500 $418,250 % To Owner 100% 71.2% 99.25% 99.25% 95.6% EVERY PLAN DESIGN IS CASH FLOW SENSITIVE

33 All Rights Reserved KNOWING ALL THE RULES CASE STUDY: SPOUSAL ADD-ON PYE Earned DB Cash DC PS Aggregated Benefits Income Balance 401K 401h Pre-COLA QP Totals (W-2 or SE) $0 to $7,950 to $0 to $0 to $7,950 to Owner $265,000 $395,000 $59,000 $38,600 $126,667 $580,667 HCE 120, ,000 1, ,000 EE 130, ,250 1, ,250 EE2 25, ,875 1, ,875 EE3 25, ,875 1, ,875 EE4 50, , ,750 S/T 250, ,750 4, ,750 Totals: $515,000 $395,000 $74,750 $43,100 $127,167 $601,417 *Spousal $150,000 $0 to $4,500 to $0 to $0 to $4,500 to Add-on $210,000 $18,750 $34,250 $35,750 $298,750 Totals $900,167 Owners $879,417 Percent to Owners 97.69%

34 All Rights Reserved KNOWING ALL THE RULES CASE STUDY The DOUBLE-UP PYE IRC 404(a)(6);IRC 446(e) Earned DB Cash DC PS Aggregated Benefits Income Balance 401K 401h Pre-COLA QP Totals (W-2 or SE) $0 to $7,950 to $0 to $0 to $7,950 to Owner PYE $265,000 $395,000 $59,000 $ 38,600 $126,667 $580,667 Owner PYB $265,000 $405,250 $59,000 $ 38,600 $130,083 $594,333 Owner Tax $265,000 $800,250 $118,000 $ 77,200 $256,750 $1,175,000 Spousal $0 to $ 9,000 to Add-on $150,000 $500,400 $ 28,800 $ 77,200 $ 89,600 $696,000 Owner + Spouse Yr.1 $1,300,650 $146,800 $154,400 $346,350 $1,871,000 Employees $250,000 $ -0- $ 15,750 $ 4,500 $ 500 $ 20,500 Double-Up Totals: $515,000 $1,300,650 $162,550 $158,900 $346,850 $1,891,500 % To Owner 100% 90.31% 98.92% ADDITIONAL CASE STUDIES Knowing the Rules MADE All the Difference

35 The Super 401k Plan Design IT ALWAYS HELPS TO KNOW 2017 All Rights Reserved CPAs = Tax & Accounting Experts 1. Help Clients Succeed (Reduce Taxes & Protect Assets) 2. Retain Clients; Grow and/or Improve Our Client Base 3. Give Their Practice & Clients a Competitive Advantage KNOWING QUALIFIED PLAN (QP) RULES DOES ALL THREE Case Example 1: Jack, Trust Officer; William (Heart Surgeon) & Partner Max $50K; All-in ; Asset Bullseye for Lawsuits Case Example 2: Steve, CPA; Barry (Advisor) & Dean (Client) Lost 6 Figure Acct Client or Crisis = Opportunity FL&K QP DESIGN PREMISE: GIVE CLIENTS A BETTER OPTION Facts: >92.8%+ of all Qualified Plans are DC Plans, 401(k) PS (650K/700K) with a 401(k) PS = Regulatory, Fiduciary, Contributory Bias in favor of EEs over Owners

36 All Rights Reserved 5 Additional Case Studies CPA, LLC Professional Service Corp Variable Cash Flow to Contributions URCO SOLO SUPER K (AGE 43 & 39) PRO-BUSINESS THE EQUALIZER Family Plans Pro Athletes Tax Partners Large Corp 50 OWNERS PLAN ALL DESIGN COMPONENTS TAX DEDUCTIBLE STOCK REDEMPTION

37 WHAT IS FL&K s AUTHORITY? 2017 All Rights Reserved Fox Lalonde & Kenne AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES ASPPA Taxes Reduced Retirement Goals Met Employee Benefit Costs Controlled & Earned Assets Creditor Proof Under Federal Law FL&K WORKING with the PLAN SPONSOR S CPA & other ADVISOR S AS A TEAM SUCCESSFUL PLAN Knowing the Rules MADE All the Difference

38 Presented by OUR GOAL: QP PRIORITY ASSISTANCE TO YOU AND YOUR CLIENT TEAM = THE CLIENT; CLIENTS (non- FL&K) ADVISORS + US FL&K QP Design, Actuarial & Admin Services Team All QP Design Proposals; Advisor and Client Services: Deanna Hanks X3 deannah@flandk.com LITTLE Z Kaye Lalonde X2 Plan Set-up; SOLOs; Billings kayel@flandk.com CPA CE Courses & Webinars; Advanced New Plan Designs, Q&A: John Lalonde X1 johnl@flandk.com & Deanna Hanks X3 New Business, Account Set-up, All 401(k) and Fiduciary Issues: Rone Davis X10 rone@flandk.com 401K Recordkeeping Bill Ulivieri X9 bill@flandk.com Actuarial & Administrative: Zak Kenne (All Plans) zakk@flandk.com Deanna Hanks (All Plans) X3 deannah@flandk.com Bruce Fox X5 (DC Only) brucef@flandk.com Stacie Jonigian X6 (DC Only) staciej@flandk.com Suzanne Romero X7 (DC Only) suzanner@flandk.com DEANNA 2017 All Rights Reserved

39 The Super 401k Plan Design Introducing & Featuring IRC 401h PRIMER Benefits 2016 All Rights Reserved INCOMING CPA SERVICE CALL - VOLUME LEADER DEANNA: ADVISOR & CLIENT SERVICES MANAGER DEANNA

40 Teamwork = Competitive Edge = Maintain, Improve, Grow 2017 All Rights Reserved KNOWING BASIC RULES (50%) TEAMWORK (the Other 50%) FL&K QP CONSULTANTS, ACTUARIES & TPAs PARTNER WITH CPAs, FINANCIAL ADVISORS and their CLIENTS USING Tax =50%+ Tax Deductible Qualified Plan Designs to address Tax Reduction Deferral & Exempt Income Retirement Planning Income & Medical Expense Asset Protection 2005 BAPCPA (Bankruptcy Abuse Prevention & Consumer Protection Act) Business Succession Buy Sell and Stock Redemption WHAT ARE THE RESULTS of TEAMWORK? EVERYONE WINS!!!

41 The Super 401k Plan Design Introducing & Featuring IRC 401h Benefits PRIMER Benefits SUMMARY The Super 401K Plan Design Trademarks a Qualified Plan Design Combining Multiple Qualified Plans, and Multiple Professional TEAM Disciplines utilizing: 1. Advanced Actuarial Methods: Concurrent Offsets, etc. 2. Unique Add-on Plan Benefits: 401h and Pre-COLA, and 3. Advanced Tax & Accounting Procedures Working together as a TEAM EVERYONE WINS!!! LET S LOOK AT A FEW MORE CASE STUDIES