A Tax Strategy for High Income Self-Employed and Small Practice Owners Defined Benefit Plans for Medical Professionals

Copyright 2009 Dedicated Defined Benefit Services LLC 2 Defined Benefit Plans ─ in the News “Benefits in a Pension for Now and Beyond” “Create Your Own Pension Plan:Classic retirement plans are an intriguing option for shielding small-business income from the IRS” Fortune Small Business, February 2008 “High contribution limits and tax benefits are big pluses for DB plans” Investment Advisor Magazine October 2007 November 2007 “Creating a pension plan helps business owners and the self-employed sock away more tax-deferred cash for retirement” Smart Money, October, 2008

Copyright 2009 Dedicated Defined Benefit Services LLC 3 Today’s Presenter  Advisor Name & photo  Affiliation  Expertise  Connection to audience Replace with your photo

Copyright 2009 Dedicated Defined Benefit Services LLC 4 Agenda  The Personal Pension Plan –Defined Benefit Plans At a Glance –Compared to Other Retirement Plans –The OnePersonPlus ® Program from Dedicated DB  Ideal Financial Situations  Meeting Your Needs –Eligible Compensation –Key Dates –Fees –Opening a DB Plan –Follow through

Copyright 2009 Dedicated Defined Benefit Services LLC 5 Defined Benefit Plans at a Glance  Qualified retirement plan approved by the IRS  Contributions are tax deductible  Highest available contributions and tax deductions of any qualified retirement plan  Contributions are based on: –your age – income –years to retirement

Copyright 2009 Dedicated Defined Benefit Services LLC 6 Comparison of Retirement Plans SIMPLE SEP Single 401(k) DB DB + 401(k) Hypothetical Example: Maximum annual contribution limits in 2009 for a Medical Professional age 52, earning $245,000 annually, retiring in 10 years $49,000 $171,300 Assumes 5-7% funding rate for Defined Benefit Plans $54,500 $21,350 $134,600

Copyright 2009 Dedicated Defined Benefit Services LLC 7 Defined Benefit Plans are Goal-oriented  Goal or “benefit” represents the amount of retirement wealth the plan will provide annually at retirement age  Benefit is established when plans are opened –Based on age, income and years until retirement –Capped at $195,000 per year (for 2009)  Employer commits to achieving the goal through regular, annual contributions large enough to meet the goal  Retirement age is typically set at age 62 or older  Plan can be amended to change the goal

Copyright 2009 Dedicated Defined Benefit Services LLC 8 OnePersonPlus from Dedicated DB A Great Tax Strategy for Baby Boomers!  Typical Plan Sponsors Medical professionals, age Owner + up to 4 employees Expect to Contribute 5 successive years  New Plans Avg. annual contributions: $120,000 Avg. term: 9+ years Integrates with a solo 401(k)  Dedicated DB’s Service Prototype plan documents eliminates cost of actuary, tax attorney Easy to open, efficient to administer – 2-page adoption agreement, simplified forms, pre-filled annual census Set up fee and annual administration fee No administration fees based on size of your account  You and Your Financial Advisor Select the Investments

Copyright 2009 Dedicated Defined Benefit Services LLC 9 Dr. Charles, Owner-only, Age 52  Annual earnings: $400,000  Maximum DB+ 401(k) contribution for 2009: $171,300 –Contribution to DB Plan: $134,600 –Contribution to 401(k): $36,700  Annual tax savings: $65,100 –Combined marginal tax rate of 38%  DB Accumulation at age 62: $2.36 Million –10 years, 5 - 7% rate of return  Annual DB Benefit: $195,000 Sole proprietor, Wants Maximum Tax Deduction

Copyright 2009 Dedicated Defined Benefit Services LLC 10 The Impact of Age on Contribution: The Older, The Better Doctor Charles  Age 52  10 Years to Retirement  Compensation: $400,000  DB Contribution: $134,600  Annual Benefit at Retirement: $195,000 Doctor Tim  Age 35  27 Years to Retirement  Compensation: $400,000  DB Contribution: $16,200  Annual Benefit at Retirement: $195,000

Copyright 2009 Dedicated Defined Benefit Services LLC 11 Anesthesiologists, C-Corp Married Couple in Business Together  5 years from retirement  W-2 Income: $490,000 ($245,000 each)  Total annual DB contribution: $351,800 $171,800 towards Paul’s retirement $180,000 towards Mary’s retirement  Annual combined income tax savings: $133,700  Accumulation at retirement: Paul: $1.1 Million Mary: $1.16 Million Paul, Age 60, Mary, Age 58

Copyright 2009 Dedicated Defined Benefit Services LLC 12 Mollie, Dentist, Age Employees  Owner’s W-2 income: $400,000 Employee 1 age 28 earning $35,000 Employee 2 age 35 earning $45,000  2009 DB contribution for owner: $162,400 DB Contribution for Employee 1: $4,000 DB Contribution for Employee 2: $8,100 93% of contribution for Mollie  Annual income tax savings for Mollie: $61,700*  Retirement accumulation for Mollie at 62: $1.65 Million *Assumes 38% combined state/federal marginal rate Dentist, C-Corp

Copyright 2009 Dedicated Defined Benefit Services LLC 13 Walter, Age 60, Professor at Med School In addition to university salary, Walter has self-employment income from consulting & serving on 2 biotech boards  Annual self-employment earnings: $100,000*  DB contribution for 2009: $80,000  Annual tax savings: $30,400 combined marginal tax rate of 38%  DB Accumulation at age 65: $513,600 5 years, 5 - 7% rate of return * High 3-year average, after payment of self-employment taxes Wants to Secure Retirement with Side Income, Sole Proprietor

Copyright 2009 Dedicated Defined Benefit Services LLC Kumar, Age 48, Radiologist, C-Corp  2009 W-2 earnings: $135,000  Maximum DB contribution for 2009: $51,800  + 401(k) contribution for 2009: $24,600  Total deduction in 2009: $76,400  2009 tax savings: $29,000 –combined marginal tax rate of 38%  DB Accumulation at age 62: $1,630,000 –14 years, 5 - 7% rate of return  Annual DB Benefit: $135,000 Wants high contributions in 2009 but needs flexibility as his income fluctuates

Copyright 2009 Dedicated Defined Benefit Services LLC 15 Eligible Compensation for a DB Plan

Copyright 2009 Dedicated Defined Benefit Services LLC 16 Key Dates  DB Plans must be opened by the end of your fiscal year, for most businesses that will be December 31 st.  The Investment Account will be opened once the Adoption Agreement is signed. If you open the plan before year end, we recommend investing no more than 50% of the assets before you have your final year-end income statement.  The investment account must be funded when taxes are filed but no later than eight and a half months after the end of your fiscal year.

Copyright 2009 Dedicated Defined Benefit Services LLC 17 Fees Defined Benefit Plan  DB Plan Set up: $1200 plus $50 per participant  DB Annual Administration: $1600 plus $100 per participant OR Defined Benefit & 401(k)  Plans Set up: $1400 plus $50 per participant (owner and spouse only)  Annual Administration: $2050 plus $200 per participant (owner and spouse only)

Copyright 2009 Dedicated Defined Benefit Services LLC 18 Establishing a Plan 1.We can run a feasibility proposal for you 2.Bring your accountant into the discussion early 3.Once the plan meets your objectives, we’ll complete a Set-up Questionnaire Send signed Questionnaire to Dedicated DB With Set-up Fee 4.We’ll send you an Adoption Agreement to sign 5.You can begin to fund the investment account