The Small Business Pension Program A Defined Benefit Retirement Plan Program for Businesses with One to Five Employees

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3 The Small Business Pension Program SM UBS Financial Services Inc. does not provide tax or legal advice. You should consult your tax or legal professionals regarding your retirement plan. The Small Business Pension Program is a service mark of UBS Financial Services Inc.

4 Types of Retirement Plans Available to Small Businesses IRA-Type Plans  SEP-IRA — Employer funded, discretionary contributions — Contributions limited to 25% of compensation up to $44,000 per participant  SIMPLE IRA — Employee pre-tax salary deferral contributions up to $10,000 ($12,500 for employees age 50 and over) — Employer required matching or non-discretionary contributions

5 Types of Retirement Plans Available to Small Businesses Qualified Plans  Defined Contribution Plans — Profit Sharing – Employer funded, discretionary contributions – Contributions limited to 25% of compensation up to $44,000 per participant — 401(k) – Employee pre-tax salary deferral contributions up to $15,000 ($20,000 for employees age 50 and over) – Employer required contributions, or non-discrimination testing required  Defined Benefit Pension Plans

6 Defined Benefit Plans  Have existed for many years  Typically have been used by larger corporations to provide employees with a pension at retirement  Now more attractive option for smaller businesses due to recent tax law changes

7 How Defined Benefit Plans Work Provides for an accumulation that creates retirement income — Plans can fund for a maximum accumulation designed to produce a maximum annual retirement income of 100% of compensation up to $175,000 per year Actuary calculates the assets needed to meet the goal — e.g., maximum accumulation is $2,121,448 to generate $175,000 per year at age 62 (5.5% rate of return assumption)

8 How Defined Benefit Plans Work Employer required to make the annual contribution necessary to gather the assets to fund the benefit — Employees do not contribute to the plan — Plan assets are pooled for all participants — Employer is plan fiduciary responsible for prudently selecting and monitoring all plan investments — Employer bears all investment risk — Returns lower than actuarial assumption will require employer to make greater contributions in future years while greater returns will reduce future contributions — Employer funds for all eligible employees based on age and service requirements

9 How Defined Benefit Plans Work The older the plan participant, the higher the maximum allowable contribution — e.g., 52 year old owner earning $200,000+ can contribute $164,000+ — Plan is designed to benefit older employees Contributions are 100% tax deductible — In 40% combined tax bracket, individual above saves $80,000+ in taxes per year Significant tax-deferred retirement savings — Owners who contribute the maximum for 10 years can accumulate as much as $2,121,448 (assuming a 5.5% investment return) This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

10 How Defined Benefit Plans Work Distributions are taxable as ordinary income when taken from the plan — Lump sum distributions can be rolled over to an IRA to keep assets tax deferred Plan typically terminated at owner’s retirement — Earlier terminations (generally sooner than three-five years) subject to IRS rules and penalties on plan excesses and shortfalls and potential disqualification by the IRS

11 What is the Small Business Pension Program? A Defined Benefit Plan Program for High-Income, Self-Employed Individuals and Small Business Owners — Your annual contributions can be greater than all other types of small business retirement plans – Up to $100,000+ or more — You can accumulate significant assets for retirement — All contributions are tax deductible to your business — Full service plan administration provided by EMJAY Retirement Plan Services, Inc. – Actuarial work – Government filings – Service

12 Is the Small Business Pension Program Appropriate for You? If you are a:  High income entrepreneur  Professional with a side business  Secondary income earner And you:  Have five employees or less (including yourself)  Want to contribute more than $44,000 per year  Are age 45 or older  Are willing to commit to three-five years of required contributions The Small Business Pension Program is worth considering.

13 Sample Client: Charlie Smith - C-Corp Occupation: Doctor Age: 52 Employees: None Annual Compensation: $400,000 W-2 Income By establishing a Small Business Pension Program:  Charlie can contribute a maximum of $164,768 in 2006  With this contribution, he’ll have tax savings in 2006 of $65,907 based on 40% combined tax bracket  His potential benefit at retirement is $2,121,448, assuming the same annual contributions for 10 years and a 5.5% rate of return This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

14 Example of Charlie’s Potential Retirement Savings Plan Accumulations Possible after 10 Years Charlie is 52, earning $400,000 annually. He’ll contribute until age 62. Assumption: 5.5% investment return This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio. Maximum Annual Contribution Accumulation $44,000 $44,000 $49,000 $24,000 $164,768 SEP IRA Profit Sharing 401(k) SIMPLE IRA Defined Benefit

15 Sample Client: John Jones - S-Corp Occupation: Attorney Age: 50 Employees: Age 40 earning $40,000 Age 35 earning $30,000 Annual Compensation: $220,000 W-2 Income (Schedule K-1 income cannot be used) By establishing a Small Business Pension Program:  John can contribute a maximum of $143,813 in 2006, $129,470 towards his retirement and $14,343 towards his employees’ retirement – 90% of the contribution is for John’s retirement  With this contribution, he’ll have tax savings in 2006 of $57,525 on his contribution alone, based on 40% combined Federal and State tax bracket  His potential benefit at retirement is over $2 million, assuming the same annual contributions for 12 years and a 5.5% rate of return This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

16 Sample Client: Ann Brown - Sole Proprietor Occupation: Marketing Consultant Age: 52 Employees: None Annual Income:$100,000 Schedule C Income*  Ann can contribute a maximum of $48,400 in 2006 by establishing a Small Business Pension Program.  Ann can also contribute an additional $20,000 to a 401(k) by establishing an Owner-Only 401(k) as long as she is not making contributions elsewhere to an employer’s 401(k) or 403(b) plan.  Ann’s combined tax-deductible contribution for 2006 would be $68,400.  Her tax savings in 2006 would be $27,300 based on a 40% tax bracket. This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

17 Sample Client: Ann Brown - Sole Proprietor Occupation: Marketing Consultant Age: 52 Employees: None Annual Income:$100,000 Schedule C Income* By establishing a Small Business Pension Program:  Her potential benefit at retirement in her Small Business Pension Program is $624,300, assuming the same annual contributions for 10 years and a 5.5% rate of return.  Ann can decide each year how much or whether to contribute to her 401(k). Depending on her contributions and investment performance, she could accumulate additional savings.  Ann may only contribute the employee contribution to the 401(k) — $15,000 plus an additional $5,000 “catch-up”contribution since she’s over age 50. Ann would be required to reduce the amount of her contributions to her 401(k) by the amount she contributes elsewhere to an employer’s 401(k) or 403(b) plan. This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

18 How Can You Establish a Small Business Pension Program?  We will prepare a customized proposal for you  We will discuss your and your tax advisor’s questions with a DB Specialist at EMJAY Retirement Plan Services, Inc.  If you want to establish the plan, you’ll complete a Set-Up Questionnaire and pay the Set-Up fee to EMJAY Retirement Plan Services, Inc. – Set Up Fees:$1,200 plus $50 per participant – Annual Fees:$1,500 plus $100 per participant per calendar year, billed quarterly  We will open an investment account

19 Common Questions Q: Is this program permitted by the IRS? A: Yes  The Small Business Pension Program uses a prototype defined benefit plan that has been reviewed and approved by the IRS  Defined benefit plans are qualified retirement plans used by small (and large) businesses for decades  Tax law changes have made DB plans more attractive for smaller employers — Allows certain business owners to make higher contributions than before

20 Common Questions Q:What if I can’t afford the plan in the future? A:The Small Business Pension Program can be flexible enough to meet your changing needs – you can:  Pay in installments through the year  Amend the plan within IRS guidelines to reduce the benefit formula which reduces the required annual contribution. Can be done once in a five-year period.  Terminate the plan within IRS guidelines (after three-five years) – Roll the assets into an IRA Note: Plans amended or terminated sooner than three-five years risk IRS penalties and plan disqualification

21 Investor Concerns  Annual contributions calculated by the plan’s actuary are mandatory and can vary from year to year: — Investment returns less than actuary’s assumption of 5.5% will result in greater required contributions in future years — Investment returns greater than actuary’s assumption of 5.5% will result in smaller permitted contributions in future years  Employees who meet the Plan’s eligibility requirements must also be covered  Plans amended or terminated sooner than a three- to five-year period risk IRS penalties and plan disqualification

22 How Do I Learn More? Provide us with the following information and we’ll prepare a customized proposal for you illustrating the contributions you can make:  Your name  Your company’s name  Your date of birth  Your annual income  The date your business started  If you have employees: — Their names — Their dates of birth — Their compensation Call Us: Name Telephone Number