What Every Business OwnerRetirement Plans Undressed…

NEEDS to Know!

Today is not the usual 401(k) talk...You are going to hear things you have

NEVER heard before.

YOU, as an owner who wants toaccumulate significant $$$ towardyour own retirement and defer taxes on current income

YOU, as an employer…attracting and retainingthe best talent

L I S T E N W I T H B O T H E A R S . . .

A G E N D A

Undressing the 401(k) Plan

Myths and Facts

Case Studies

Summary / Q&A

agenda

Name some sources you count on for retirement

Which of these can you control?

H O W I M P O R T A N T I S Y O U R 4 0 1 ( k ) P L A N ?

- Home- Business- Retirement Plan- Inheritance- Other

introduction

H O W I M P O R T A N T I S Y O U R 4 0 1 ( k ) P L A N ?

Which of your personal assets/parts of your business may beprotected from litigation?

What aspects of employee compensation/benefits are easily changeable when business conditions fluctuate?

introduction

I F Y O U C O U L D , W O U L D Y O U ?

Pass all required discrimination tests?

Retain your most talentedemployees longer?

Put $49,000 pre-tax in your own 401(k) plan each year with 100% approval fromthe IRS?

introduction

Provide performance incentives forstaff members who are most importantto your success…and be able to changehow you do it each year?

Shift company dollars from taxablebonus programs to the tax-deductible401(k) plan?

I F Y O U C O U L D , W O U L D Y O U ?

introduction

I F Y O U D I D , W H A T D O E S I T M E A N F O R Y O U ?

Accumulating $2.2 million in the next 20 years.

Deferring over $435,000 in personal income taxes over the next 20 years.

Assumes interest rate of 6.5%

$1.4 million in 15 years

$2.2 million in 20 years

Accumulating $1.4 million in yourindividual 401(k) plan account over the next 15 years, tax deferred.

introduction

W H Y A R E N ' T Y O U D O I N G T H I S ?

introduction

U N D R E S S I N G T H E 4 0 1 (k) P L A N

undressing the 401(k) plan

4 0 1 ( k ) P L A N S A T F I R S T G L A N C E

undressing the 401(k) plan

InvestmentsInvestments

+PlanPlan Document

Design

Most people are never shown below the surface.

4 0 1 ( k ) P L A N S : B E L O W T H E S U R F A C E

undressing the 401(k) plan

R E S U L T S = P L A I N V A N I L L A

undressing the 401(k) plan

IRS rules allow flexibility, but traditional solutionsdon’t include it.

Their focus is on investments (and making a profit)!

Big companies/traditional providers choose to avoid plan design because their profit is derivedfrom the investments.

C O N S E Q U E N C E S O F P L A I N V A N I L L A ?

undressing the 401(k) plan

Business owners are boxed in!

T R A D I T I O N A L C H O I C E S =V A N I L L A , C H O C O L A T E O R S T R A W B E R R Y

undressing the 401(k) plan

401(k) plans have become a commodity…

IRS rules allow

I T T A K E S T W O T O M A K E A P L A N P E R F O R M

Investment progress to matchemployee and business objectives

Continued evaluation of investmentchoices for performance and fiduciarycompliance

undressing the 401(k) plan

Knowledge of investment andfiduciary responsibilities

Customized, IRS-approved retirement plan document

Continuous evaluation of plan designso that each year’s solution meets business’s objectives

Knowledge of tax law and plandesign expertise

Financial Advisor Retirement Plan Design

MYTHS & FACTS

myths & facts

myths & facts

G R O U P Q U I Z

True/False: Discrimination rules force owners to provide the same level of benefit to all others as they provide to themselves

True/False: All retirement plan documents are basically the same and use similar methods of operation

Maximum amount you can save each year?- $22,000- $54,500- $250,000

M Y T H S A N D F A C T S : M Y T H # 1

I take back money every year! Low employee participation won´t allow meto have a meaningful plan.

There are ways to predictand prevent testing failuresthrough plan design thatallow owners to maximizecontributions.MYTH!FACT.

myths & facts

M Y T H S A N D F A C T S : M Y T H # 2

Everyone knows that ownersmax out at only $16,500per year.

Owners can save up to$49,000 in 2010, includingTheir $16,500 401(k) deferral.

For those age 50 andolder you can receive anadditional $5,500.

MYTH!

FACT.

myths & facts

M Y T H S A N D F A C T S : M Y T H # 2

IRS Allows$49,000!!!

Employer Contributions!

+ 401 (k) deferral

= $49,000* total tax deferred

* $54,500 for those over 50

Everyone knows that owners max out at only $16,500 per year.

myths & facts

M Y T H S A N D F A C T S : M Y T H # 2

Only a custom plan allows the maximum to be reached efficiently.

Employees17¢

Owners83¢ of every

$1.00 contributed.

myths & facts

M Y T H S A N D F A C T S : M Y T H # 3

It is illegal to treat employeesdifferently in a 401 (k) plan.

Custom plan documentsallow different treatments fordifferent people.

Owners may select individualemployees and give themmore – without having togive more to the newer andunproven staff members.

MYTH!

FACT.

myths & facts

M Y T H S A N D F A C T S : M Y T H # 3 D I S P E L L E D

Give your starperformers more! +

Give unprovenstaff members theminimum required.

=

I can reward individuals who are important to my business!

myths & facts

M Y T H S A N D F A C T S : M Y T H # 4

Once an initial approach is inPlace, you´re stuck for good.

Customized plan designsallow patterns and methodsto be changed on a yearlybasis to meet owners’objectives as circumstanceschange – without amendingthe plan document!

MYTH!

FACT.

myths & facts

M Y T H S A N D F A C T S : M Y T H # 4 D I S P E L L E D

HAVE A PLAN THAT´S TAILOR-MADEEVERY YEAR!

Changes?NO NEED TO PANIC...

myths & facts

M Y T H S A N D F A C T S : M Y T H # 5

There is no way to improvemy current design. I alreadyshelter the maximum; it is as good as it is going to get

Receiving 70% of all contribution dollars paid into your plan is good; fine tuning the design may allow 93%!

MYTH! FACT.

myths & facts

M Y T H S A N D F A C T S :

Let me dispel your myth...

Prepare for Retirement

myths & facts

Attract & Retain Talent

Maximize Tax Deferral Opportunity

Succession Planning

(speed accumulation)

(reward individuals)

(defer till death)

(help for family businesses)

W H O I S A N I D E A L C A N D I D A T E F O R A C U S T O M I Z E D P L A N D O C U M E N T / D E S I G N ?

Owners or partners who want to reward select employees

Owners or partners already making employeecontributions (such as matching employee 401 (k) deferrals)Owners or partners who wants to maximize tax deferred savings

Owners or partners earning $200,000 or more per year1. 2.

3.

4.

Fewer than 200 employees5.

myths & facts

C A S E S T U D I E S

is this for me?

G R E G ‘ S S T O R Y

Taking over the family business

Greg’s W-2 between $200,000 & $250,000 each year

45 years old

25 employees

Mom (79 yrs. old) still working in business part-time

Greg’s pain point: plan limits whathe can shelter

is this for me?

G R E G ' S S T O R Y :

is this for me?

$17,200Match

Employees$6,900to Owner!

$900 Match

$6,000401 (k) deferral

Plain Vanilla

$1,300 Match

$8,700401 (k) deferral

Employees

$2,600Profit Sharing

$17,200Match

$49,000to Owner!

$39,000Profit Sharing

Custom Design

G R E G ' S S T O R Y : B O T T O M L I N E

Custom Plan49%

Plain Vanilla71%60%

No Plan

is this for me?

S U E ’ S S T O R Y

Built a successful business over thepast 20 years

Annual W-2 for Sue = $320,000

52 years old

100 employees

6 – 8 key executives earning > $110,000

Sue’s pain points:- employees don’t value the plan- Sue’s restricted in her own savings

is this for me?

S U E ' S S T O R Y

is this for me?

$51,000Match

Employees

$25,500to Founder

$3,500 Match

$22,000401 (k) deferral

Plain Vanilla$54,500

to Founder!

$32,500Profit Sharing

$22,000401 (k) deferral

Employees

$7,200Profit Sharing

Custom Design

S U E ' S S T O R Y : B O T T O M L I N E

Custom Plan34%

Plain Vanilla82%60%

No Plan

is this for me?

S U E ' S S T O R Y : C O N T I N U E D

is this for me?

$40,000Match

Employees

$92,500to Founder and Key Executives

$17,500Match

$75,000401 (k) deferral

Plain Vanilla$247,000

to Founder and Key Executives

$172,000Profit Sharing

$75,000401 (k) deferral

Employees

$32,000Profit Sharing

Custom Design

M A R K ’ S S T O R Y

Mark’s annual income willexceed $450,000 each year

60 years old

30 employees

Landed a 10-year contract, guaranteeing increased income

Mark’s pain point: - “I need a tax shelter!”- $54,500 per year is not enough

is this for me?

M A R K ' S S T O R Y

is this for me?

$19,200Match

Employees$14,300to Owner

$1,800 Match

$12,500401 (k) deferral

Plain Vanilla$217,000to Owner!

$172,000Pension

$23,000Profit Sharing

Employees

$16,500Profit Sharing

Custom Combination Design

$22,000401 (k) deferral

$1,200Pension

M A R K ' S S T O R Y : B O T T O M L I N E

Custom Plan57%

Plain Vanilla92%60%

No Plan

is this for me?

SUMMARY / Q&A

summary / q&a

K E Y P O I N T S

90% of 401(k) plans = PLAIN VANILLA

key points

K E Y P O I N T S

= Banana Split

The allows much more flexibility

key points

Lori GordonPrincipal & CEO

C E L L : 2 1 5 - 3 5 9 - 5 5 2 0

O F F I C E : 2 1 5 - 2 2 2 - 5 0 0 0

L G O R D O N @ M A N D . C O MW W W . M A N D . C O M

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