The following presentation presented by: Hector A. May Executive Compensation Planners, Inc. 20 Squadron BlvdSuite 600 New City, NY A Financial Planning & Benefits Advisory Firm Tel: (845) Fax: (845)

Maximizing the Perceived Value of your of your Company’s 401(k) Plan

The Case Study included in the presentation contains data that is hypothetical in nature The Case Study included in the presentation contains data that is hypothetical in nature. It should take about six minutes to review.

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A 401(k) plan is one of the most powerful employee benefit arrangements that exists. Any firm that offers this plan is likely to have a more productive and loyal employee group. Unfortunately, too often participants have only a limited knowledge of the long-range financial horsepower of their accounts.

1. What is the approximate value of your 401(k) account? 2. How much are you contributing each month? 3. Does the company match any of your contributions? 4. If so, how much is the match? 5. How is your account invested? Most employees can answer the following five “today” questions with a high degree of accuracy:

6. What average annual yield do you expect? 7. What age do you reasonably expect to retire? 8. What will your account be worth at retirement? 9. How much will your account provide in retirement income? 10. How long will that income last? On the other hand, most employees cannot answer these next five “tomorrow” questions with any degree of confidence:

6. What average annual yield do you expect? 7. What age do you reasonably expect to retire? 8. What will your account be worth at retirement? 9. How much will your account provide in retirement income? 10. How long will that income last? A long-range problem occurs because no one is consistently helping them with answers to the tough “tomorrow” questions: Clearly, employees are attracted to the deductibility of their 401(k) contributions and the resulting tax free treatment of any growth.

For example, assume an employee, age 45, decides to allocate $5,000 to the company’s 401(k) plan. Assume the company matches at a 50% rate, i.e., for every dollar allocated by the employee, the company contributes 50 cents. In addition, most employees are unaware of the extent of the financial firepower created by an employer’s matching contributions. $370,672 Assuming a yield of 8%, by age 65, the 401(k) account will have grown to $370,672.

Alternatively, the employee could skip the 401(k), pay taxes on the $5,000 (let’s assume a combined federal and state levy of 30%), and invest the resulting $3,500 on a do-it-yourself basis. Assuming the same 8% yield (except this is a taxable yield), the employee could build a do-it-yourself account of $130,251 by age 65. That’s a 285% difference in favor of the 401(k) plan. 401(k) Plan $370,672 Do-It-Yourself $130,251 Click below to review the pre-retirement numbers. 401(k) Do-It-Yourself

With a continuing 8% yield and depleting the funds over 20 retirement years, the $370,672 in the 401(k) could produce annual taxable cash flow of $34,957 (generating annual after tax cash flow of $24,470.) There are very few of your employees who can accurately calculate these comparative values. With a continuing 8% yield and depleting the funds over 20 retirement years, the $130,251 in do-it-yourself could produce annual after tax cash flow of $10,407, only 42.5% of the 401(k)’s after tax results. Click below to review the retirement numbers. 401(k) Do-It-Yourself At Retirement...

Click here to see the comparative results if the do-it-yourself account is invested in equities. 6% Growth; 2% Dividend; 50% Portfolio Turnover. Capital Gains: 50% short term; 50% long-term. Click here to continue with the presentation...

There is a way to find out about the “tomorrow” knowledge of your employees... Click here to review a Survey that will help you determine the perceived value of the long-range benefits of your 401(k) plan by your participating employees. 11. Do you want information regarding the questions you couldn’t answer? We stand ready to provide information -- directly or through you -- to those employees who return the Survey with Question #11 answered “Yes”:

Benefits of the Survey   Because the analysis makes your employees better informed, their perception of your 401(k) plan increases significantly.   Because of the analysis, your employees will be better prepared for retirement.   Because of the analysis, your employees will likely be inclined to participate at a higher level of contribution.   Because the analysis tends to increase employee participation, your highly compensated executives (“HCEs”) will typically be able to increase their level of participation.

Our Participation There are two ways we can help: Follow-up with Survey respondents and integrate the results of the 401(k) plan into their overall retirement planning strategy.1. Serve as your back office relative to the calculation of the answers requested by Survey respondents, and provide you with the information to deliver to your employees.2. Our compensation arrangements for either service are available on request.

The yield and tax bracket assumptions used in this presentation are hypothetical in nature and should not be considered representative of any particular investment product or strategy. Click here to start from the beginning. Click here to end this presentation. Copyright 2004, InsMark, Inc. All Rights Reserved