The UBS Small Business Pension Program Year-End Training Event, November 1, 2005 Presented By: EMJAY Retirement Plan Services

Not for Public Use 2 Neither EMJAY Retirement Plan Services nor UBS Financial Services Inc. provide legal or tax advice. Clients should be advised to consult with their legal and tax professionals before choosing to participate in the Small Business Pension Program. EMJAY Retirement Plan Services and UBS Financial Services Inc. are not affiliated.

Not for Public Use 3 Today’s Agenda  Overview of Small Business Retirement Plans  What is the Small Business Pension Program?  Client Benefits  Client Suitability  Next Steps

Overview of Retirement Plans Available to Small Businesses

Not for Public Use 5 What Choices Do Small Business Owners Have?  SEP IRA  SIMPLE IRA  Profit Sharing  401(k)  Defined Benefit

Not for Public Use 6 What Plan Can Work if Business Has No Employees? 401(k) (Owner-Only) SEP IRA Defined Benefit Wants annual contributions up to lesser of 25% or $42,000* Wants slightly larger contribution of 25% plus $14,000*, up to $42,000* plus $4,000* extra for ages 50+ Wants to contribute more than $42,000* and willing to commit to annual contributions *2005 limits

Not for Public Use 7 What Plan Can Work if Business Has Employees? SIMPLE IRA or 401(k) (Safe Harbor) SEP IRA or Profit Sharing Defined Benefit Wants to make annual employer contributions up to lesser of 25% or $42,000* Wants employee salary deferrals with limited employer required contribution Older owner (age 45+) wants maximum contribution and has few employees (1-4) Vesting, part timer exclusion and loans available in profit sharing *2005 limits

Not for Public Use 8 For Whom Are These Plans Suitable? SEP IRA Profit Sharing Defined Benefit All employer funded plans May be suitable if employer is willing to make all plan contributions SIMPLE IRA 401(k) Employee and employer funded plans May be suitable if employer wants employees to share in funding retirement plan by making salary deferral contributions

Not for Public Use 9 Assumptions: 52 year old earning $400,000 annually, contributing until age % investment return. Maximum Annual Contribution in 2005 Accumulation After 10 Years $42,000 $42,000 $46,000 $24,000 $160,000 SEP IRA Profit Sharing 401(k) SIMPLE IRA Defined Benefit Maximum Annual Contributions and Retirement Accumulations – One Person Plan This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

What is the Small Business Pension Program?

Not for Public Use 11 What is the Small Business Pension Program?  A simplified and streamlined turn-key defined benefit plan program  Designed for businesses of one to five employees  Created specifically to take advantage of recent changes in the tax code  May allow a small business owner to make some of the highest tax-deductible retirement contributions allowed by law

Not for Public Use 12 How Much Can Be Contributed to a Small Business Pension Program?  Generally more than the contribution limit for defined contribution plans (i.e. $42,000 in 2005) when the business owner is older  Typical annual contributions to a Small Business Pension Program are in the $100,000 to $200,000 range

Not for Public Use 13 How Do Defined Benefit Plans Work?  The benefit at retirement is equivalent for each employee, based on a percentage of compensation  Age and income affect how much can be contributed to the plan  By contrast, in most defined contribution plans, only income affects the contribution, not age  Each client’s contribution is different based on age and income Age 65Age 55 Age years 40 years

Not for Public Use 14 How are Contributions Determined?  Plan can fund for a maximum retirement benefit of 100% of compensation up to $170,000 per year (2005 limit)  Actuary calculates total assets needed to provide retirement benefit (maximum of $2,060,835 at age 62)  Actuary then calculates annual contribution needed to provide those assets at retirement  Because older employees are closer to retirement, contributions on behalf of those employees must be greater to provide for the retirement benefit

Not for Public Use 15 How Are Assets Invested?  All investments are held in a UBS branch account  Plan assets are pooled for all participants  Investments are directed by plan’s trustee – usually the business owner  Employer bears all investment risk and fiduciary responsibility  Flexible array of stock, bonds, mutual funds, managed account programs, etc.  Since the program’s actuary assume an investment return of 5.5% per year, investments should be selected to target this rate of return  Returns exceeding 5.5% will decrease required contributions in future years  Returns less than 5.5% will increase required contributions in future years

How Can Your Clients Benefit?

Not for Public Use 17 What are the Benefits to the Client?  Contributions and investment earnings are tax-deferred  The annual tax savings in a Small Business Pension Program are typically in the $40,000 to $80,000 range  Client can roll over assets into an IRA upon retirement or plan termination – otherwise they are taxable as ordinary income when distributed

Client Suitability

Not for Public Use 19 What Type of Business Owner Might Be Interested?  Doctors  Dentists  Lawyers  Consultants  Entrepreneurs  Real estate professionals  Self employed spouses of high-income earners  Board members  CPAs

Not for Public Use 20 Who is Eligible?  Sole-proprietors  Corporations  S-corps  Partnerships  Business types with issues:  Controlled groups  Owner paid both W-2 income and divided distributions Call EMJAY at (866) for help in determining whether a business is eligible

Not for Public Use 21 For Whom is this Suitable?  Business owners who are 45 years old or older  Have five or fewer employees  Earn $100,000 or more per year  Willing to make an annual commitment to the plan

Not for Public Use 22 Considerations How Does The Required Commitment Work?  IRS expects plan to be permanent  Client has to contribute for a fixed number of years – generally at least three to five years  Earlier terminations are subject to IRS rules and penalties on plan excesses and shortfalls and potential disqualification by the IRS  Client needs good annual cash flow and stable income stream

Not for Public Use 23 What if a Client Does Not Want to Make the Commitment?  Consider a SEP IRA, Profit Sharing or Owner-Only 401(k)  No required contribution  Lower contribution limit ($42,000 plus possible $4,000 catch-up for ages 50+ in 2005)  Same investment flexibility  EMJAY also offers plan administration services for Owner-Only 401(k) plans

Not for Public Use 24 Sample Clients  Occupation:Doctor  Age:55  Employees:0  Compensation:$300,000  Contribution:$174,501  Tax Savings:$69,801 (40% tax bracket) Retirement Benefit: $1,442,585 This hypothetical illustration is provided for illustrative purposes and is not intended to represent a specific investment or portfolio. Retirement benefit is based on a 5.5% actuarial return assumption.

Not for Public Use 25 Sample Clients  Occupation:Lawyer  Age:50  Employees:2  Age 30, $41,500  Age 35, $42,500  Compensation:$250,000  Contribution:$137,767 (91% for her)  Tax Savings:$50,308 (40% tax bracket) Retirement Benefit: >$2,000,000 This hypothetical illustration is provided for illustrative purposes and is not intended to represent a specific investment or portfolio. Retirement benefit is based on a 5.5% actuarial return assumption.

Not for Public Use 26 What Do You Do Next?  Plans must be established with plan documents completed and signed by business’s year-end (12/31 for calendar year businesses)  Go through your current book of business and look for small business owners who:  are 45 years old or older;  have five or fewer employees;  earn $100,000 or more per year; and  are willing to make fixed annual contributions for three to five years

Not for Public Use 27 What Do You Do Next?  Visit the website:  Use available marketing materials:  Client Brochure  Prospecting Letters  Newsletters for prospecting ideas  Select “Run a Client Proposal” link at top right of the page  Present the proposal

Not for Public Use 28 Creating a Client Proposal

Not for Public Use 29 How Do You Close the Sale?  When you run a proposal, an EMJAY consultant will call you in a day or two.  Under no circumstances will EMJAY call your client directly.  Once you have a client who is interested, call an EMJAY specialist at (866) for a conference call with your client.  Submit the Set-Up Questionnaire along with the set-up fee.  Open the UBS investment account.  Contact UBS Retirement Consulting Services at , option 1 for general information on all small business retirement plans

Not for Public Use 30 What Does EMJAY Do?  EMJAY is the program’s third party plan administration firm providing:  Actuarial work  Government filings  Client service  EMJAY plan administration fees:  Set Up: $1,200 plus $50 per participant  Annual: $1,500 plus $100 per participant

Thank You

Questions?