1. ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT of 2001 (EGTRRA) Plan Sponsor Web Conference Call Tuesday, October 9, 2001 For Plan Sponsor Use Only. Not for Distribution.

2. A Connection that Makes the Most of Y O U R P L A N T R A N S A M E R I C A, T H E I R S, & Y O U : Adam Bonsky Vice President, Client Services Emily Urbano Vice President, Plan Compliance For Plan Sponsor Use Only. Not for Distribution.

3. Why The Connection Is Important To You Opportunity to Enhance Your Plan Opportunity to Enhance Your Plan Higher Contribution Limits Higher Contribution Limits Increased Profit Sharing Deduction Limit Increased Profit Sharing Deduction Limit Simplified Rules for New Plans Simplified Rules for New Plans More Benefits with 401(k) Profit Sharing Plans More Benefits with 401(k) Profit Sharing Plans Enjoy Your Plan for Less Enjoy Your Plan for Less Reduce Taxes as a Corporation Reduce Taxes as a Corporation Lower IRS Fees Lower IRS Fees Lower Administrative Fees Lower Administrative Fees

4. For Plan Sponsor Use Only. Not for Distribution. Our Discussion Agenda The Advantages of New Contribution Limits The Advantages of New Contribution Limits Case Studies Case Studies Benefit from Increased Profit Sharing Deduction Limit Benefit from Increased Profit Sharing Deduction Limit Pay Less Taxes and Save Money Pay Less Taxes and Save Money Put EGTRRA into ACTION Put EGTRRA into ACTION How Transamerica is Helping You How Transamerica is Helping You

5. For Plan Sponsor Use Only. Not for Distribution. New Contribution Limits Everyone Can Save More Current Effective Effective Maximum Limits for Defined Contribution Plans: Law 2002 2003 Maximum Combined Employer/ Employee Contributions $35,000 $40,000 Maximum Compensation$170,000 $200,000 Employee Contribution Limits: 401(k) Plans$10,500$11,000 $12,000 Catch-Up Limits for 401(k) Plans [Age 50+] N/A$1,000 $2,000 SIMPLE 401(k) Plans$6,500$7,000 $8,000 Catch-Up Limits for SIMPLE 401(k) Plans [Age 50+] N/A$500 $1,000 (i) Lesser of $35,000 or 25% of employee compensation. (ii) Lesser of $40,000 or 100% of employee compensation; with Cost of Living Adjustment (COLA) increase in $1,000 increments after 2002. (iii) COLA increase in $5,000 increments after 2002. (iv) Increasing by $1,000 each year in 2004-6; thereafter, COLA increase in $500 increments. (v) Increasing by $1,000 each year in 2004-5; thereafter, COLA increase in $500 increments. (vi) Increasing by $500 each year in 2004-6; thereafter, COLA increases in $500 increments. ii iii iv v vi i

6. For Plan Sponsor Use Only. Not for Distribution. Understanding The Limits Helps Everyone Save More 415 limits are based on the limitation year, typically the same as the plan year 415 limits are based on the limitation year, typically the same as the plan year The compensation limit is based on the plan year The compensation limit is based on the plan year The employee deferral limit is based on the calendar year The employee deferral limit is based on the calendar year The catch-up contribution is based on the calendar year The catch-up contribution is based on the calendar year SIMPLE limits are based on the calendar year SIMPLE limits are based on the calendar year The 25% deduction limit is based on the employer’s taxable year that ends with or within the last day of the plan year The 25% deduction limit is based on the employer’s taxable year that ends with or within the last day of the plan year

7. For Plan Sponsor Use Only. Not for Distribution. Understanding The Catch-Up Provision Older Workers Can Save More Who Can Benefit Who Can Benefit Events Triggering Catch-up Events Triggering Catch-up Employee has reached maximum deferral limit ($11,000) Employee has reached maximum deferral limit ($11,000) Employee has reached maximum contribution limit (lesser of 100% of pay or $40,000) Employee has reached maximum contribution limit (lesser of 100% of pay or $40,000) Employee has contributed maximum deferral limit under the plan (example: 15% of pay) Employee has contributed maximum deferral limit under the plan (example: 15% of pay) Employee deferrals limited by ADP Test Employee deferrals limited by ADP Test and for certain employees age 50+…MORE savings

8. For Plan Sponsor Use Only. Not for Distribution. New Limits Build Better Retirements HCEs Can Save More Founder and CEO of X-Croft, a 6-person Web-based services firm Founder and CEO of X-Croft, a 6-person Web-based services firm $250,000 Annual Gross Income $250,000 Annual Gross Income Age 55 Age 55 Plan limits deferrals to 5% for HCEs Plan limits deferrals to 5% for HCEs Objective: Maximize her retirement contribution Objective: Maximize her retirement contribution

9. For Plan Sponsor Use Only. Not for Distribution. New Limits Build A Better Retirement HCEs Can Save More Geena Monroe, CEO Post-EGTRRA 2001 2002 Maximum Compensation$170,000$200,000 401(k) Contribution5% $8,5005% $10,000 NCP Contribution$26,500$30,000 Catch-Up Contribution$0$1,000 Total Retirement Savings$35,000$41,000 and for your select employees…MORE savings

10. For Plan Sponsor Use Only. Not for Distribution. New Limits & Tax Credit Benefit Low To Middle Income Employees Employee, Burger World Age 21 Filing head of household 15% tax bracket 50% tax credit rate Employer Match: 50% of first 6%

11. For Plan Sponsor Use Only. Not for Distribution. New Limits & Tax Credit Benefit Employees NHCEs Can Save More Rick Howell Post-EGTRRA 2001 2002 Gross Income$18,000$18,000 401(k) Contribution 2% ($360) 6% ($1,080) Employer Match$180$540 Gross Income on W-2$17,640$16,920 Federal Income Tax ($2,646) ($2,538) Bottom Line Tax Credit* $0** $540 Impact on Federal Income Tax After Tax Credit$2,646$1,998 401(k) Savings$540$1,620 * * Deduction is applied after FICA and all other applicable taxes are taken from gross income. ** ** Does not reflect amount of 2001 tax rebate check. and for your employees…MORE savings

12. For Plan Sponsor Use Only. Not for Distribution. Income Tax Credit Low To Middle Income Employees Available to individuals with joint/head of household/single AGIs of $30,000/$22,500/$15,000 Available to individuals with joint/head of household/single AGIs of $30,000/$22,500/$15,000 Phases out for joint/head of household/single AGIs over $50,000/$37,500/$25,000 Phases out for joint/head of household/single AGIs over $50,000/$37,500/$25,000 Must be 18 or older (not a dependent or full-time student) Must be 18 or older (not a dependent or full-time student) Maximum contribution eligible is $2,000 Maximum contribution eligible is $2,000 Tax Credit up to 50% of employee contribution, maximum of $1,000 Tax Credit up to 50% of employee contribution, maximum of $1,000

13. For Plan Sponsor Use Only. Not for Distribution. Income Tax Credit Low To Middle Income Employees The contribution amount eligible for the tax credit is reduced by distributions during the testing period which are includible in gross income The contribution amount eligible for the tax credit is reduced by distributions during the testing period which are includible in gross income Example:Tax Year 2002 Rick’s Deferrals in 2002$1,080 2000 Hardship Withdrawal$1,000 Tax Credit Rate for 200250% Maximum Tax Credit$40 ($1,080 – $1,000 x 50%) ($1,080 – $1,000 x 50%) Expires 1/1/2007 Expires 1/1/2007

14. For Plan Sponsor Use Only. Not for Distribution. Improved Income Tax Credit Helps Employees Save More Planning Tips: The Testing Period with respect to a tax year is: (1) the current tax year; (2) the 2 preceding tax years; and (3) the period after the end of the current tax year and before the due date (plus extensions) for filing the return for the year. The Testing Period with respect to a tax year is: (1) the current tax year; (2) the 2 preceding tax years; and (3) the period after the end of the current tax year and before the due date (plus extensions) for filing the return for the year. The tax credit will be applied after the child and dependent care and the child tax credit have been accounted for. The tax credit will be applied after the child and dependent care and the child tax credit have been accounted for. Employees should take advantage of their employer's tax-preferred family savings accounts to defray child and dependent care expenses. Employees should take advantage of their employer's tax-preferred family savings accounts to defray child and dependent care expenses. Allows employees to maximize usage of the tax credit Allows employees to maximize usage of the tax credit If a joint return is filed by a participant and his/her spouse and the spouse receives a distribution during the testing period, the distribution is considered received by the participant. If a joint return is filed by a participant and his/her spouse and the spouse receives a distribution during the testing period, the distribution is considered received by the participant.

15. For Plan Sponsor Use Only. Not for Distribution. Income Tax Credit Helps Employees Save More Married Joint Filer Head of HouseholdAll Other FilerCredit Rate $0 - $30,000 $0 - $22,500$0 - $15,00050 percent $30,001 - $32,500 $22,501 - $24,375$15,001-$16,25020 percent $32,501 - $50,000 $24,376 - $37,500$16,251-$25,00010 percent Over $50,000 Over $37,500Over $25,000 0 percent

16. For Plan Sponsor Use Only. Not for Distribution. Increased Profit Sharing Deduction Limit Reduces Your Company’s Taxes New profit-sharing deduction limit is 25%, up from 15% last year New profit-sharing deduction limit is 25%, up from 15% last year Permits total payroll, including 401(k) deferrals Permits total payroll, including 401(k) deferrals 401(k) deferrals are not subject to the employer deduction limit 401(k) deferrals are not subject to the employer deduction limit Post EGTRRA 2001 2002 Company Eligible Payroll$1,000,000$1,000,000 (401(k) Employee Deferrals) ($100,000)$100,000 Adjusted Eligible Payroll$900,000$1,000,000 Deduction Limitx 15% x 25% Employer Deductible Amount$135,000$250,000 401(k) Employee Deferral$100,000N/A Employer Contributions$35,000$250,000 Total Deductible Amount$135,000$350,000

17. For Plan Sponsor Use Only. Not for Distribution. and for your company…a plan that SAVES MONEY Build More With Profit Sharing Plans Using Increased Employer Deduction Limit Profit Sharing Plans Offer the Flexibility Your Business Needs Profit Sharing Plans Offer the Flexibility Your Business Needs Discretionary Contributions Discretionary Contributions No Minimum Funding Required No Minimum Funding Required Flexible Plan Designs Flexible Plan Designs Which Sponsors Benefit the Most? Which Sponsors Benefit the Most? Sponsors with Money Purchase Pension Plans Sponsors with Money Purchase Pension Plans Sponsors with Two Plans (Money Purchase and Profit Sharing) Sponsors with Two Plans (Money Purchase and Profit Sharing) Sponsors already contributing full 15% Sponsors already contributing full 15%

18. For Plan Sponsor Use Only. Not for Distribution. Build More With Profit Sharing Plans Using Increased Employer Deduction Limit Planning Tip: With EGTRRA, no advantage to Money Purchase Plans. Convert to a Profit Sharing Plan. Planning Tip: With EGTRRA, no advantage to Money Purchase Plans. Convert to a Profit Sharing Plan. Lower Costs, Less Reporting, Flexible Plan Designs and More Benefits Lower Costs, Less Reporting, Flexible Plan Designs and More Benefits Call Your Transamerica Service Consultant for details. and for your company…a plan that SAVES MONEY

19. For Plan Sponsor Use Only. Not for Distribution. EGTRRA Solves Correction Failures For 401(k) Plan Sponsors 401(k) plans are subject to unique discrimination tests 401(k) plans are subject to unique discrimination tests HCEs have often been limited in what they can defer HCEs have often been limited in what they can defer Many Plan Sponsors correct test failures by refunding contributions to HCEs Many Plan Sponsors correct test failures by refunding contributions to HCEs EGTRRA provides a better solution EGTRRA provides a better solution

20. For Plan Sponsor Use Only. Not for Distribution. Make Testing Corrections for Less Using Bottom-Up QNECs AVG Traditional Bottom Up – QNEC AVG Traditional Bottom Up – QNEC Name Income Deferral ADP% ADP QNEC 2001 2002 HCE 1$150,000$10,5007% HCE 2$150,000$10,5007% HCE 3$150,000$10,5007% HCE 4$150,000$10,5007%7% NHCE 1$60,000$1,6002%4% NHCE 2$55,000$1,1002%4% NHCE 3$50,000$1,0002%4% NHCE 4$45,000$9002%4% NHCE 5$40,000$8002%4% NHCE 6$35,000$00%4% NHCE 7$30,000$00%4% NHCE 8$25,000$00%4% NHCE 9$20,000$00%4%15% NHCE 10$5,000*$00%1%4%25%40% *Terminated 5/10/01 $14,600 $4,250 $2,000 (lesser oflesser of (lesser oflesser of $35,000 or$40,000 or $35,000 or$40,000 or 25% of pay)100% of pay) 25% of pay)100% of pay)

21. For Plan Sponsor Use Only. Not for Distribution. Make Testing Corrections for Less Using Bottom-Up QNECs Which plans would benefit the most from a QNEC? Plans that routinely fail non-discrimination tests Plans that routinely fail non-discrimination tests Plans that do not cover HCEs because they fear testing failure Plans that do not cover HCEs because they fear testing failure Plans that are resistant to Safe Harbor for cost considerations Plans that are resistant to Safe Harbor for cost considerations Companies that want to use contributions strategically Companies that want to use contributions strategically and for your company… CORRECTIONS for LESS

22. For Plan Sponsor Use Only. Not for Distribution. Employees Enjoy Plan Benefits Sooner Faster Vesting Schedules EGTRRA accelerated the vesting schedule for matching contributions: EGTRRA accelerated the vesting schedule for matching contributions: Cliff – 3 years from 5 Cliff – 3 years from 5 Graded – 6 years from 7 Graded – 6 years from 7 Planning Tip: Although the new schedule is only required for post-2002 match, consider using one schedule to simplify administration. Planning Tip: Although the new schedule is only required for post-2002 match, consider using one schedule to simplify administration.

23. For Plan Sponsor Use Only. Not for Distribution. 7-Year Graded Vesting6-Year Graded Vesting Years ofVestedVested Credited ServicePercentagePercentage Less Than 10%0% 10%0% 20%20% 320%40% 440%60% 560%80% 680%100% 7100% Employees Enjoy Plan Benefits Sooner Faster Vesting Schedules

24. For Plan Sponsor Use Only. Not for Distribution. EGTRRA Makes Your Job Easier Top Heavy Rules Simplified New Key Employee Definition—“Any employee who in the prior year was: New Key Employee Definition—“Any employee who in the prior year was: an officer earning in excess of $130,000 annually (subject to increases in $5,000 increments) an officer earning in excess of $130,000 annually (subject to increases in $5,000 increments) a 5% owner a 5% owner a 1% owner earning in excess of $150,000 annually.” a 1% owner earning in excess of $150,000 annually.”

25. For Plan Sponsor Use Only. Not for Distribution. and for your company…SAVE MORE MONEY EGTRRA Makes Your Job Easier Top Heavy Rules Simplified Simplifications: Simplifications: Repeal of look-back year for key employee definition Repeal of look-back year for key employee definition Repeal of 4-year look-back rule for distributions, except in- service distributions Repeal of 4-year look-back rule for distributions, except in- service distributions Repeal of 4-year look-back rule for taking into account balances of terminated employees Repeal of 4-year look-back rule for taking into account balances of terminated employees Repeal of top-10 owner category Repeal of top-10 owner category Exemption of Safe Harbor 401(k) plans from top-heavy testing Exemption of Safe Harbor 401(k) plans from top-heavy testing Satisfy top-heavy minimum with matching contributions Satisfy top-heavy minimum with matching contributions Simplifies data gathering process for Plan Sponsors Simplifies data gathering process for Plan Sponsors Less officers who will be HCEs Less officers who will be HCEs

26. For Plan Sponsor Use Only. Not for Distribution. and for your company…LESS COSTS EGTRRA And IRS Less Costs For Small Businesses IRS User Fee Waived Plans established by sponsors with 100 or less employees Plans established by sponsors with 100 or less employees At least one NHCE must be covered under the plan At least one NHCE must be covered under the plan IRS filing submitted after 12/31/2001 and before the last day of the 5th plan year (or the end of the plan’s remedial amendment period that occurs within the 5 years, if later). IRS filing submitted after 12/31/2001 and before the last day of the 5th plan year (or the end of the plan’s remedial amendment period that occurs within the 5 years, if later). Plan TypeIRS User Fee Prototype$125 Volume Submitter$125 / $1000 (limited / full scope) Individually Designed$700 / $1250 (limited / full scope)

27. For Plan Sponsor Use Only. Not for Distribution. Shorter Hardship Suspension Period Employees Can Contribute Faster Reduced suspension period to 6 months from 12 Reduced suspension period to 6 months from 12 Allows employees to resume deferrals sooner Allows employees to resume deferrals sooner Helps plan pass the required ADP test Helps plan pass the required ADP test You must amend Safe Harbor plans to add the reduced suspension period You must amend Safe Harbor plans to add the reduced suspension period Effective June 7, 2001 Effective June 7, 2001 Planning Tip: For employees who took hardship distributions in 2001, consider reducing the suspension period to 6 months. Planning Tip: For employees who took hardship distributions in 2001, consider reducing the suspension period to 6 months.

28. For Plan Sponsor Use Only. Not for Distribution. Individual rollovers permitted between employer 401(a), 403(b), governmental 457 plans, and IRAs Individual rollovers permitted between employer 401(a), 403(b), governmental 457 plans, and IRAs Allows participants to consolidate their retirement savings accounts Allows participants to consolidate their retirement savings accounts Tax-exempt employer 457 plans are excluded Tax-exempt employer 457 plans are excluded Applies to distributions after 12/31/2001 Applies to distributions after 12/31/2001 New Portability Is A Big Win For You And Your Employees and for your company…the chance to INCREASE Plan Participation and Assets

29. For Plan Sponsor Use Only. Not for Distribution. How Transamerica Is Helping You Good Faith Amendments All qualified plans must be amended All qualified plans must be amended Good Faith amendments need to be in place to avoid cut back Good Faith amendments need to be in place to avoid cut back In some cases, additional EGTRRA amendments will be required In some cases, additional EGTRRA amendments will be required Remedial Amendment Period for EGTRRA will extend until at least 2005, if Good Faith Amendments are adopted on time Remedial Amendment Period for EGTRRA will extend until at least 2005, if Good Faith Amendments are adopted on time IRS has provided sample language on some provisions IRS has provided sample language on some provisions Many EGTRRA provisions still require IRS guidance Many EGTRRA provisions still require IRS guidance Not all EGTRRA provisions are required, e.g., Portability and Catch-Up Contributions are optional Not all EGTRRA provisions are required, e.g., Portability and Catch-Up Contributions are optional EGTRRA Good Faith Amendments to be mailed in October EGTRRA Good Faith Amendments to be mailed in October

30. For Plan Sponsor Use Only. Not for Distribution. How Transamerica Is Helping You Plan Amendments EGTRRA Good Faith amendments are separate from GUST* EGTRRA Good Faith amendments are separate from GUST* Currently, GUST Amendments are being prepared Currently, GUST Amendments are being prepared Our GUST restatement will include determination for Cross Tested New Comparability Plan Final Regulations for the Volume Submitter Document Our GUST restatement will include determination for Cross Tested New Comparability Plan Final Regulations for the Volume Submitter Document Consulting with clients on desired EGTRRA changes Consulting with clients on desired EGTRRA changes *The GUST amendments are a compilation of amendments required to be made to qualified plans to conform with tax law changes covering the years 1994 to 2000. Most plans have 12 months after IRS approval of Transamerica's Prototypes and Volume Submitter plans in order to adopt the amendments. Transamerica will be processing and mailing these amendments to plan sponsors in the next several months.

31. For Plan Sponsor Use Only. Not for Distribution. How Transamerica Is Helping You Ongoing Communication Communicating EGTRRA Advantages Communicating EGTRRA Advantages Worth a Look Worth a Look Informed Sponsor Informed Sponsor Web site, Direct Mail Web site, Direct Mail Telephone, Client Visits Telephone, Client Visits Building Awareness for Your Employees Building Awareness for Your Employees Worth a Look Worth a Look Informed Participant Informed Participant Web site Web site Posters Posters Statement Messages Statement Messages Enrollment Meetings and Materials Enrollment Meetings and Materials Voice Response Unit (VRU) Voice Response Unit (VRU)

32. For Plan Sponsor Use Only. Not for Distribution. And for you...Begin enjoying a Plan with MORE Make The Most Of The Connection Ongoing Communication Planning Tip: Make the most of EGTRRA. Planning Tip: Make the most of EGTRRA. Congress can decide to either sunset the provisions or continue them after 2010. Why take a chance. Start NOW! Your Action Steps Your Action Steps Contact Your Transamerica Service Consultant Contact Your Transamerica Service Consultant Convert your Money Purchase Plan to a 401(k) Profit Sharing Plan Convert your Money Purchase Plan to a 401(k) Profit Sharing Plan Maximize contributions and encourage employees to increase theirs Maximize contributions and encourage employees to increase theirs Take advantage of increased profit sharing deduction limit Take advantage of increased profit sharing deduction limit Increase participation…the more participants save, the more you do Increase participation…the more participants save, the more you do Look for your EGTRRA Plan Amendment Mailing Look for your EGTRRA Plan Amendment Mailing Choose the options you like Choose the options you like Sign the EGTRRA Amendments Sign the EGTRRA Amendments Return to Transamerica ASAP Return to Transamerica ASAP

33. For Plan Sponsor Use Only. Not for Distribution. Any Questions? Let Us Help Transamerica Retirement Services is your expert resource for: Transamerica Retirement Services is your expert resource for: Plan design consulting Plan design consulting EGTRRA guidance EGTRRA guidance Customized retirement solutions Customized retirement solutions ERISA expertise ERISA expertise New Comparability plans New Comparability plans Your Transamerica Service Consultant is here to help. Your Transamerica Service Consultant is here to help.