Let’s Make A Deal: Taxes, Healthcare & The Decisions Ahead James Slotnick, JD AVP, Sun Life Institute NOT FDIC/NCUA INSURED MAY LOSE VALUE NO BANK/CREDIT UNION GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT FOR USE WITH THE PUBLIC.

Heading Towards “Taxageddon” Healthcare: Fact & Fiction Deficit Reduction: Tough Decisions Ahead

3 Taxes Income tax rates – 2011 & 2012 –Top rates 33% / 35% –Dividends/capital gains 0% if in 10% or 15% bracket 15% for everyone else FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

4 Taxes Estate Tax Changes –2011 & 2012 Full step-up in basis 35% top estate tax rate Estate tax exemption set at $5 million –Unused exemption becomes portable –Unified with gift tax exemption FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

5 Taxes 2013 – “Taxageddon” Bush Tax Cuts expire (again) Estate Tax reverts to $1 million Healthcare taxes kick In FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

6 Taxes Healthcare legislation – 2 new tax increases –Medicare payroll tax Employee portion increases –1.45% up to $250,000 –2.35% over $250,000 FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

7 Taxes Healthcare legislation – 2 new tax increases –Unearned income excise tax Additional 3.8% tax on unearned income Applies to those making more than $250,000 FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

8 Taxes Health Care Legislation - Medicare Excise Tax –Every $10,000 Capital Gain At a 15% Cap Gain Rate – $1, % Additional Tax - $380 Total Tax Due: $1,880 At a 20% Capital Gain rate - $2, % Additional - $380 Total Tax Due: $2,380 FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

9 Taxes Heading Towards “Taxageddon” –2012 Elections All about taxes –Taxes & Investing Taxes may play a bigger role in investment decisions –Municipal bonds –Tax efficient mutual funds –Variable annuities –Life insurance FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

Heading Towards “Taxaggedon” Healthcare: Fact & Fiction Deficit Reduction: Tough Decisions Ahead

11 Healthcare Reform The Individual Mandate –Fines for not having health insurance Potential exemptions based on income –Beginning in 2014 fines will be greater of: % of income Flat dollar amount FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

12 Healthcare Reform The Individual Mandate –Employers Under 50 Employees No penalty for not offering coverage –Employers Over 50 Employees Penalty for not offering coverage or affordable coverage FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

13 Healthcare Reform The W2 Issue W-2 will include employer paid health insurance -Not taxable to employee -Future taxation? FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

Heading Towards “Taxaggedon” Healthcare: Fact & Fiction Deficit Reduction: Tough Decisions Ahead

15 Deficit Reduction Budget Control Act –Immediate Spending Cuts –Immediate Increase of the Debt Ceiling –Creation of the Joint Select Committee FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

16 Deficit Reduction Joint Selection Committee 12 Member Committee –6 House / 6 Senate Must create $1.2 Trillion in budget cuts –House / Senate cannot change their bill –If rejected automatic $1.2 Trillion in cuts FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

17 Summary –Taxes Be on the lookout for 2013 –Health Care Reform More questions than answers –Deficit Reduction Uncertain times ahead FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

18 Next steps Learn more about how our Advanced Markets Group can help your clients. Call us at , Option 2 Ask for our Advanced Markets Group James Slotnick, JD ;

19 Thank you All withdrawals of taxable amounts, including earnings, are taxable as ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal tax penalty. Withdrawals may also be subject to surrender charges if they exceed the annual free withdrawal amount, and may reduce the contract values, death benefits, and any living benefits. Your clients should consider the investment objectives, risks, charges, and expenses of a variable annuity. For this and other important information, request a prospectus from the sales desk. Please read both the variable annuity product and the variable investment option prospectuses carefully before investing or sending money for clients. Sun Life Financial, its distributors, and its respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Clients should consult their own independent advisors about any tax, accounting, or legal statements made herein. Sun Life Financial Masters variable annuities are issued by Sun Life Assurance Company of Canada (U.S.) (Wellesley Hills, MA) in all states except New York. In New York, the contracts are issued by Sun Life Insurance and Annuity Company of New York (New York, NY). Variable products are distributed through Sun Life Financial Distributors, Inc. All three companies are members of the Sun Life Financial group of companies. © 2011 Sun Life Assurance Company of Canada (U.S.). All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. (Exp. 02/13) SLPC (02/11)