For Agent Use Only. Not for use with the General Public Cash Balance Pension Plans Presented By Michael F. Kresl, CPA National Sales Manager The American National Insurance Company American National Ins. Co. For Agent Use Only. Not for use with the General Public

The AMERICAN NATIONAL INSURANCE COMPANY (ANICO) A AM Best AA- S & P COMDEX of 95 104 Years Old GALVESTON TEXAS American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans Cash Balance plan designs have been around for many years, with some high profile “conversions” in the late 1990s (IBM, Citigroup); Prior to PPA 2006 significant lawsuits concerning plan design – Cooper v. IBM; In 1999 IRS placed a moratorium on Cash Balance Plan approvals; American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans The Pension Protection Act of 2006 removes doubt as to plan design legitimacy; IRS “lifts” approval moratorium 1/1/2007; “Hybrid” Plans become an important planning tool for successful businesses as economic changes occur 2008 - Present American National Ins. Co. For Agent Use Only. Not for use with the General Public

What is a Cash Balance Plan? An ERISA “Qualified Plan;” A “Hybrid” Defined Benefit Plan with Defined Contribution Features; A uniquely positioned plan design with the ability to equalize contributions between owners or HCEs of disparate ages American National Ins. Co. For Agent Use Only. Not for use with the General Public

What is a Cash Balance Plan? Defined Benefit Plan Features Maximized and potentially equalized contributions for Owners or HCEs; A required annual contribution with minimal flexibility; No employee portion of contributions; Employer bears investment risk; IRC 415 limits apply – no $49,000 limit; American National Ins. Co. For Agent Use Only. Not for use with the General Public

What is a Cash Balance Plan? Defined Contribution Features Flexibility to base contribution amounts on different classes of employees; Lower contribution for employees (New Comparability); Participants have an account balance with contributions and interest added annually; “Combo Plans” allow for concurrent DB and DC plans; American National Ins. Co. For Agent Use Only. Not for use with the General Public

What is a Cash Balance Plan? Comparison with New Comparability Profit Sharing Plan New Comp 401(k) P/S Cash Balance “Hybrid” Plan Age Salary Contribution Contribution 55 $196,000 $ 49,000 $ 166,747 44 34,000 1,700 2,805 36 30,000 1,500 1,677 25 28,000 1,500 916 22 20,000 1,000 564 $ 308,000 $ 54,700 $ 172,709 89 % to Owner 97 % to Owner American National Ins. Co. For Agent Use Only. Not for use with the General Public

What is a Cash Balance Plan? Comparison with a Traditional Defined Benefit Plan Traditional DB Plan Cash Balance “Hybrid” Plan Age Salary Contribution Contribution 62 $ 225,000 $ 190,000 $ 100,000 43 225,000 48,000 100,000 36 36,000 3,100 2,700 29 30,000 2,500 1,900 24 26,000 1,900 1,200 $ 245,500 $ 205,800 For illustration purposes only, numbers rounded. American National Ins. Co. For Agent Use Only. Not for use with the General Public

COMPARISON OF MAXIMUM CONTRIBUTIONS (ASSUMING NRA OF 65) Traditional AGE $401(k) DASH Defined Benefit “Cash Balance Plans” 412(e)(3) 40 $ 49,000 $ 33,361 $ 38,000 $ 94,674 45 $ 49,000 $ 50,159 $ 55,000 $ 108,619 50 $ 49,000 $ 79,272 $ 88,000 $ 166,552 55 $ 49,000 $ 139,362 $ 153,000 $ 215,94155 60 $ 49,000 $ 163,659 $ 179,000 $ 287,867 The numbers shown above are for illustration purposes only and in some cases are” rounded.” Actual numbers could be more or less and will depend upon plan design, employee participation, use of life insurance in the plan, and other factors. . American National Ins. Co. For Agent Use Only. Not for use with the General Public

What is a Cash Balance Plan? Lets look at some examples . . . See “Sample Employer, Inc.” (Plan Design #1) American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Plan Summary Sample Employer, Inc. For the Plan Year 01/01/2009 through 12/31/2009 American National Ins. Co. For Agent Use Only. Not for use with the General Public

First Year Plan Contributions American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Plan Allocation Formulas Sample Employer, Inc. For the Plan Year 01/01/2009 through 12/31/2009 American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Employee Census Sample Employer, Inc. For the Plan Year 01/01/2009 through 12/31/2009 American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Valuation Statement Sample Employer, Inc. For the Plan Year 01/01/2009 through 12/31/2009 American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Financial Results Sample Employer, Inc. For the Plan Year 01/01/2009 through 12/31/2009 Tax Summary American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans Plan Design # 2: Two Owners, 4 EEs Age Salary Contribution 61 $ 225,000 $ 150,000 54 225,000 150,000 48 34,000 3,411 35 30,000 1,596 32 28,000 1,288 26 20,000 686 $ 562,000 $ 306,981 98% to Owners American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans Plan Design # 3: 5 Owners, 20 EEs Objective: Defer $100,000 Per Owner $ 560,573 Total Plan Contribution $ 60,573 To Employees 90 % To Owners! American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans Plan Design # 4: 10 Owners/HCEs, 34 EEs Objective: Defer $100,000 per Owner/HCE $1,070,563 Contribution $70,563 to EEs 93 % to Owners! American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans Summary: A Defined Benefit Plan with the ability to equalize contributions between different aged Owners/HCEs; Stated Annual Contributions with Little Flexibility; Annual “Contribution Credits” and “Interest Credits” credited to Participant “hypothetical” Accounts; Employer Bears Investment Risk; Can use a variety of Fixed or Variable Investments including Life Insurance American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans Typical Costs associated with Plans * $ 500 “Installation Fee” (Covers Documents) $ 1,000 IRS Letter Of Determination ** $ 2,000 Annual Administration Fee (up to 25 Lives) * Based upon American National Insurance Company posted fees 1/1/09; ** May vary depending upon plan design; New plans may be eligible for tax credits up to $500 for first 3 years American National Ins. Co. For Agent Use Only. Not for use with the General Public

Cash Balance Pension Plans An “underserved market” especially Successful Owners looking for large tax deductions & “catch up” with possible guarantees; Change in Pension Rules (PPA ’06) allow for excellent plan design capabilities beyond what most clients and advisors realize; Prospective clients are more approachable now than ever; American National Ins. Co. For Agent Use Only. Not for use with the General Public

“An Underserved Marketplace” Owners seeking higher tax deductions than Defined Contribution Plans can provide; Owners seeking to accumulate significant retirement funds in a relatively short time; Multiple Owners looking to equalize contributions between owners/HCEs; “Older” Owners with younger, lower paid employees; Owners seeking additional protection of assets from liability and creditors; American National Ins. Co. For Agent Use Only. Not for use with the General Public

Why American National? Turnkey Program – “One Throat to Choke” Featuring . . . Free, “no-obligation” professional plan design and/or review Preparation and filing of plan documents Various investment platforms – from fixed to variable Complete Low Cost Administration/Record Keeping No “Gray areas,” No “Off-Shore” Schemes, No “Audit Flags” American National Ins. Co. For Agent Use Only. Not for use with the General Public

American National Insurance Company 104 years old, closely held and publicly traded (ANAT) A AM Best AA- S &P COMDEX of 90 Asset/Liability Ratio over 120% Has Paid Dividends in 99 Years No Corporate Debt Issued Buy & Hold Strategy in Bond Portfolio No CDOs, CMOs, CLOs, CBOs, NO TARP American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Not to Mention . . . Deferred Annuities – Including “CD Type” MYGs Immediate Annuities (SPIA & SPLIT) Indexed Annuities – Annual Reset & End Term Life Insurance – WL, UL, Term and VUL Pension Design and Administration “Voluntary Benefits” with List Bill or Payroll Ded American National Ins. Co. For Agent Use Only. Not for use with the General Public

For Agent Use Only. Not for use with the General Public Your ANICO Team Outside Group Mike Kresl, CPA – North Region 866-892-1311 Scott Whitten, FLMI – South Region 949-910-8110 Don Noble, CLU – West Region 877-289-5265 Gil Dudrow, - East Region 800-727-5617 Inside Support Brad Bennett - Home Office 877-446-6236 Ext 5976 Marci Dutton – Home Office 877-446-6236 Ext 4497 American National Ins. Co. For Agent Use Only. Not for use with the General Public