The document provides an overview and summary of a presentation on successful retirement planning. It discusses the current economic environment and where the economy has been, where it is now, and where it may be going. It also discusses employer-sponsored retirement plans and how they can fit different practices. The presentation was given by Tim Gaigals and covered topics like different types of retirement plans that are commonly used, when each type is best utilized, and how to design an effective retirement plan.

1. Insight into the Successful Retirement Presented by Tim Gaigals, CFP® Securities products and advisory services offered through registered representatives and investment advisory associates of: Ameritas Investment Corp., Inc. (AIC) Member FINRA/SIPC P.O. Box 5507 Lincoln, NE 68505 800-335-9858 AIC is not affiliated with Tax Favored Benefits, Inc.

4. Some of Our Staff

17. Where are we now?

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40. When and Where to Use Pay Based Profit Sharing Plans What it is – A Pay Based Profit Sharing Plan is a defined contribution plan under which the employer agrees to make variable contributions (usually at the discretion of its Board of Directors) for the benefit of its employees. Contributions are allocated by formula to the account of each participant. Benefits are the value of each participant’s account at retirement or termination of employment.

42. Pay Based Profit Sharing Plan A plan where the employer agrees to make variable contributions for the benefit of employees. Contributions are allocated by formula to the account of each participant. Benefits are the value of each participant’s account at retirement or termination of employment. HC – Represents Highly Compensated Employee Non HC – Represents Non-Highly Compensated Employee NHCE’s 50.95% HCE’s 49.05% ABC Company Retirement Plan ABC Company Profit Sharing

43. When and Where to Use Integrated Profit Sharing Plans What it is – An Integrated Profit Sharing Plan is a form of defined contribution plan under which the employer agrees to make variable contributions (usually at the discretion of its Board of Directors) for the benefit of its employees. The basis for allocating employer contributions under this type of plan is determined by a multi-step process which takes participant compensation and a Social Security Integration Level into account so that the rate of allocations above the integration level is greater than the rate of allocations at or below the integration level. The integration level must equal the Social Security taxable wage base in effect at the beginning of the plan year or must satisfy an alternative test. The disparity of the allocation above the integration level cannot exceed the lesser of 5.7% or an alternative percentage tied to the Social Security tax.

45. Integrated Plan A plan integrated with social security benefits can provide for contributions and benefits which favor highly paid employees as long as the plan complies with rules which limit the disparity above and below a specified level and provides some minimum benefit for all employees. ABC Company Retirement Plan ABC Company Integrated Plan HC – Represents Highly Compensated Employee Non HC – Represents Non-Highly Compensated Employee

46. When and Where to Use Age Based Profit Sharing Plans What it is – An Age Based Profit Sharing Plan is a form of defined contribution plan under which the employer agrees to make variable contributions (usually at the discretion of its Board of Directors) for the benefit of its employees. The basis for allocating contributions under this type of plan is determined by calculating the present value of an annuity for life equal to 1% of pay beginning at age 65 .

48. Age Weighted Plan The age-weighted method allocates contributions based on both the age and compensation of eligible employees. It is similar to a defined benefit pension plan, only with discretionary contributions. Since the participants age, or length of time until retirement, is factored into the allocation formula, older participants receive a larger proportionate share of the contribution. This can be advantageous in a situation where the key employees are significantly older than the other employees. In certain situations, an age-weighted plan design works extremely well, but a possible drawback could be employees with the same salaries receiving different allocations, based on age. Also, an older non-principal employee may receive a larger share than a younger principal. ABC Company Retirement Plan ABC Company Age Weighted Plan

49. When and Where to Use Comparability Profit Sharing Plans (Also Known As Cross-Tested Plans) What it is – A Comparability Profit Sharing Plan is a form of defined contribution plan under which the employer agrees to make variable contributions (usually at the discretion of its Board of Directors) for the benefit of its employees. The employees are grouped according to some determining factor, such as executives, management, and clerical staff in a company. The structure of the group must be defined in the plan document. Each grouping of employees has its own allocation method and must pass the minimum coverage test (or if it cannot, the general pension nondiscrimination test). There is one method of satisfying this coverage test. An allocation method might, for example, allocate the contribution for a specific group based on the ratio that an individual’s compensation within that group bears to the total compensation for all participants within that group along with age.

52. New Comparability Plan The comparability, or cross-tested, allocation method allows the employer to divide the employees into different classifications for purposes of allocating the contribution. If non-discrimination requirements are met, a larger share of the company’s contribution may be made on behalf of those employees to whom the employer wishes to provide a more significant benefit. The non-discrimination testing, like an age-weighted plan, is based on projected benefits at retirement, similar to a defined benefit plan. If the aggregated age of the preferred class is higher than the other classes, the allocation of current dollars can be skewed proportionately toward the older group. ABC Company Retirement Plan ABC Company New Comparability Plan

53. When To Use A Defined Benefit Plan What it is – A Defined Benefit Plan is designed to provide plan participants with a plan defined benefit at retirement (example 20% of compensation). Contributions are based on the benefit provided and the actuarial assumptions and cost method determined by the plan’s enrolled actuary. Guaranteed Annuities and Retirement income contracts may also be used to fund benefits through an I.R.C. 412(i) plan.

54. Defined Benefit Calculation Process Here’s a Defined Benefit Plan calculation, when putting all the important elements together: Benefit Formula Provisions Characteristics of Plan Participants + + Assumptions of Future Plan Experiences = Annual Contributions Necessary to Fund Future Benefits and Provide for the Insured Death Benefits Calculating Annual Plan Contributions An actuary reviews the plan each year and calculates the amount that must be contributed so the plan will have sufficient assets to pay the promised benefits to participants at retirement. The plan actuary bases the amount of plan contributions on factors that include: * The retirement benefits promised by the plan * The age, salary and retirement age of the participant * The mathematical projections, using assumptions for: - interest to be earned by the plan assets - future salary increases of the participants - the projected rates of turnover, disability and mortality of the plan participants

56. ABC Company Retirement Plan ABC Company Defined Benefit Plan If employee #6 is eliminated then the contribution of $29,347.42 is gone which would reduce the total contribution to $195,893 and increasing the % of Budget to the Owner to 75.04% If further employee #4 is also eliminated then the contributions of $29,347.42 and $20,511.11 are both gone reducing the total contribution to $175,382.70 and increasing the % of Budget to the Owner to 83.82%.

57. * 83.82% if eliminate employees #4 and #6 ABC Company Retirement Plan ABC Company Plan Comparative Analysis

58. When and Where to Use 401(k) Plans What it is – A 401(k) Plan is a form of a Profit Sharing Plan which permits employees to make pre-tax salary contributions. In addition, the employer can make matching contributions or discretionary profit sharing contributions. Benefits are the value of each participant’s account at retirement or termination of employment.

61. ABC Company Retirement Plan ABC Company Traditional 401(k) with Matching Contributions Note: Owner limited to 5% salary deferral because of Discrimination Test which permits him to contribute approximately 200 basis points more than the average deferral of the non-highly compensated employees. Assumes match of $0.50/$1.00 to 6% and the NHC employees only defer 3% of compensation. They could contribute more in which case the Owner could contribute more with higher matches. NHCE’s 30.78% HCE’s 69.22%

62. When and Where to Use Safe Harbor Plans What it is – A Safe Harbor 401(k) Plan is one in which an employer is not required to perform nondiscrimination testing of elective contributions or matching contributions. To be within the safe harbor, a 401(k) plan must meet certain employer contribution requirements and must provide for 100 percent immediate vesting of these contributions.

65. ABC Company Retirement Plan ABC Company Safe Harbor 401(k) with Matching Contributions Safe Harbor 401(k) with Matching Contributions A defined contribution plan in which employees can defer up to the lesser of $16,500.00 or 100% of compensation. Employer must match 100% of employee contributions up to 3% of compensation plus 50% of employee deferrals in excess of 3% up to 5% of compensation. Note: Assumes Owner wishes to maximize his salary deferral and non-highly compensated employees contributes 5% of compensation. The non-highly compensated employees could contribute less, in which case the employer matches for them would be less.

66. Safe Harbor 401(k) with 3% Non-Elective Contribution Formula A defined contribution plan in which employees can defer up to the lesser of $16,500.00 or 100% of compensation. Employer must contribute 3% on behalf of all eligible employees. Note: Assumes Owner wishes to maximize his salary deferral and non-highly compensated employees make no salary deferrals because employer makes a 3% non-elective contribution for them. The non-highly compensated employees could make salary deferrals. However, the employer’s contribution is still limited to 3% of compensation. ABC Company Retirement Plan ABC Company Safe Harbor 401(k) with 3% Non-Elective Contribution Formula

67. COMBINATION OF VARIOUS TYPES OF 401(K) PLANS WITH VARIOUS TYPES OF PROFIT SHARING PLAN ALLOCATIONS

68. ABC Company Retirement Plan ABC Company Safe Harbor 401(k) with 3% Non-Elective Contribution Formula Plus 3% Pay Based Profit Sharing Allocation

69. ABC Company Retirement Plan ABC Company Safe Harbor 401(k) with 3% Non-Elective Contribution Formula Plus New Comparability Plan Safe Harbor 401(k) Plan/New Comparability Plan with 3% Contribution The Super Comparability Plan was created by new IRS rules in 1999. This plan combines the Safe Harbor 401(k) with the New Comparability Profit Sharing Plan. It allows you and your key employees to defer up to $16,500.00 into the 401(k) portion of the plan provided you contribute at least 3% of all eligible employees’ gross salaries to the profit sharing part of the plan.

71. If eliminate employee #6 then the contribution of $29,347.42 is gone reducing the total contribution to $195,893 and increasing the % of Budget to the Owner to 75.04%. If further eliminate employee #4 then the contributions of $29,347.42 and $20,511.11 are gone reducing the total contribution to $175,382.70 and increasing the % of Budget to the Owner to 83.82% ABC Company Retirement Plan ABC Company Plan I Defined Benefit Plan TWO PLAN APPROACH (Cash Balance Plan)

72. ABC Company Retirement Plan ABC Company Plan II Safe Harbor 401(k) with 3% Non-Elective Contribution Formula Plus 3% Pay Based Profit Sharing Allocation TWO PLAN APPROACH Cash Balance Defined Contribution

73. ABC Company Retirement Plan ABC Company Defined Benefit Pension Plan and Defined Contribution Plan Consisting of Safe Harbor 401(k) with 3% Non-elective Contribution Formula Plus 3% Pay Based Profit Sharing Allocation TWO PLAN APPROACH (Cash Balance Plan)

74. 2010 Retirement Plan Limits Corporate Office 4801 W. 110 th Street, Ste. 200 Overland Park, KS 66211 Ph: 913-648-5526 Fax: 913-648-6798 www.taxfavoredbenefits.com Specializing in Retirement Plans, Employee Benefit Programs, Personal Planning and Investments $49,000/Individual Up to 25% of total employee compensation Employer’s Deductible Defined Contribution Limit No Roth conversions if MAGI exceeds $100,000 or if married, filing separately MAGI does not include MRD’s *Limitation expires in 2010 $0-$10,000 MAGI Filing separately $105,000-$120,000 MAGI Single $167,000-$177,000 MAGI Joint Phaseout of Roth Contribution Check $167,000-$177,000 AGI Spousal IRA $56,000-$66,000 AGI Single or head of household $89,000-$109,000 AGI Joint Phaseout for Deducting IRA Contribution (qualified plan participant) $6,500 Age 50 and over $5,500 IRA and Roth IRA Contributions Under age 50 $245,000 Annual compensation taken into account for qualified plans $110,000 Highly compensated employee makes $195,000 Annual benefit limit on defined benefit plan $49,000 Limit on additions to defined contributions plans *On 401(k) contributions this amount may need to be reduced if the employee is highly compensated based on the annual testing limit. A highly compensated employee is defined as: - 5% owner (including spouse, children, grandchildren, parents, etc.) - Employee with compensation > $110,000 in the 2009 plan year $22,000* 50 & over $16,500* 401(k), 403(b), 457 $106,800 Income Subject to Social Security Tax