1. Advanced Planning Opportunities with Annuities
GE (5/16) (Exp. 5/18)

2. Advanced Annuity Strategies
Tax Deferral for Irrevocable Trusts
In-Kind Transfers of Trust Owned Annuities
Strategy for Qualified Plans
Today’s presentation will focus on 4 key strategies.
The first strategy will focus on using annuities within Irrevocable Trusts. These trust accounts are seeing a significant increases in taxes from last year to this year. These trusts may benefit greatly from the value of tax deferral within annuity contracts.
The second strategy is a twist on account ownership structure involving trust owned contracts that may open up some opportunities.
The third strategy involves using Retirement Cornerstone as a funding option for a defined benefit or defined contribution plan for a small business owner.
Let’s start with our first strategy, tax deferral for Irrevocable Trusts.

3. Why Annuities – Tax Landscape
Medicare Surtax
3.8%
Surtax is ‘lesser of’ investment income or MAGI over $200,000 (Single), $250,000 (MFJ), and $12,400(Trusts & Estates)
Taxpayer Relief Act of 2012
Tax Brackets
39.6% bracket for incomes above $415,050 (Single), $466,950 (MFJ), $12,400(Trusts & Estates)
Capital Gains and Dividends
Raises to 20% for incomes in excess of $415,050 (Single), $466,950(MFJ), $12,400 (Trusts & Estates)
One reason why tax deferral will become more important are some of the changes we are going through from a legislative tax perspective. There are two significant pieces of legislation that are impacting clients from a tax perspective. The first is the Affordable Car Act that created the Medicare surtaxes and the Taxpayer Relief Act of 2012 which created higher income and investment taxes for the individuals in the highest ax bracket. Lets take a look at these changes in a little more detail.
Income Taxes
Tax Brackets
The bill extends the 10%, 25%, 28%, 33% rates on income at or below $415,050 (individual filers), and $466,950 (married filing jointly) for taxable years beginning after December 31, 2012.
Capital Gains and Dividend Rates
The capital gains and dividend rates for taxpayers below the 25% bracket is equal to zero percent. For those in the 25% bracket and above, the capital gains and dividend rates are currently 15%. The bill extends the current capital gains and dividends rates on income at or below $415,050 (individual filers), and $466,950 (married filing jointly). For income in excess of these amounts the rate for both capital gains and dividends will be 20%.
Estate/Transfer Tax
Exemption Allowance and Rates
The exemption allowance at $5 million per person with a top tax rate of 40% for the estate, gift, and generation skipping transfer taxes. The exemption amount was indexed beginning in 2012 and is currently $5.45M.
Portability of Unused Exemption
The executor of a deceased spouse’s estate is allowed to transfer any unused exemption to the surviving spouse for estates of decedents dying after December 31, 2010.
Reunification
Estate and gift taxes are unified creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests.

4. Trust Taxation Under ATRA of 2012
If undistributed trust income exceeds appx. $12,000
Top marginal tax bracket becomes 39.6%
Long term capital gain and qualified dividends is 20%
Medicare Surtax of 3.8% of the lesser of amount over $12,400 or net investment income
Could mean a substantial tax increase for certain trusts
Individual taxpayers are not the only ones who will be impacted by these new taxes. Irrevocable trusts will also be highly impacted by these changes and in many cases will be much more impacted than individuals.
Lets discuss how irrevocable trusts can be impacted. First it is important to note we are specifically talking about irrevocable trusts and not revocable living trusts. Irrevocable trusts are considered their own taxable entity and therefore are subject to income and investment taxes at the trust level. When a trust creates taxable income like dividends, capital gains, or ordinary income the trust can choose to distribute the income or retain the income within the trust. If the trust pays out the income to the beneficiaries of the trust the beneficiary who receives the income would be responsible for any tax liability. Many of these trusts will retain the income within the trust or reinvest it. This is where the tax problem arises. If the trust has undistributed income the trust needs to pay taxes on that income at trust tax rates. Now trusts are taxed on a tiered tax rate system just like individuals. Unfortunately for trusts those tiers are much more compressed. In fact in 2016 once a trust reached undistributed income of $12,400 the trust is taxed as if they are in the highest individual tax bracket. By comparison a married couple filing jointly does not reach that bracket until they reach $466,950 in income. The result of this is the income tax bracket has increased from 35% to 39.6%, long term cap gains and qualified dividends are now taxed at 20% not 15%, and are now subject to this 3.8% medicare surtax.
The net result can be significant increases for irrevocable trusts.

5. Trust Taxation 2012 vs 2016 Case Study: $5M Irrevocable Trust
Trust grantor passed away several years ago
Trust is a Family or B Trust
Designed to provide income for surviving spouse if needed (ascertainable standards)
Remaining assets to pass to children
Currently invested is a diversified allocation of 60% stocks, 30% bonds, 10% cash
Last year trust earned $120,000 in dividends, $60,000 in interest, and realized $150,000 in long term capital gains
No income was distributed for surviving spouse
Lets take a look a case study involving an irrevocable trust. The important thing is to focus on the tax liability created by the income. In this example we have a A/B trust scenario. One spouse has died and the A/B trust has been funded. For this example we will focus on the B Trust. This is a trust funded with $5 million in this example. The trust is designed to provide for wealth transfer to kids, grandkids, or any other beneficiary that’s not the spouse. The spouse has the ability to take income from the trust if he or she needs it. In this example we will assume the spouse does not need income from the trust. We assume the assets are invested in a typical 60%/40% split between equities and fixed income and cash. For this example we will assume this portfolio created $120,000 in dividends, $60,000 in interest, and $150,000 in long term capital gains. Lets take a look how that income would have been taxed in 2012 and 2015.

6. Potential Tax Implications
Trust Taxation 2012 vs 2016
Potential Tax Implications
2012
2016
Interest
$19,934
$22,055
LT Cap Gains and Dividends
$40,500
$54,000
Top Marginal Rate
35%
39.6%
Medicare Surtax
$12,068
TOTAL
$60,434
$88,123
Let’s take a look at The $60,000 in interest created a tax liability of $19,934. The long term gains and dividends would be taxed at 15% for a tax liability of $40,500. Added together the tax liability would be $60,434. Lets take a look at how this income would be taxed in The same $60,000 in interest would created a tax liability of $22,055. This is due to the highest marginal rate increasing from 35% to 39.6%. The same $270,000 in long term cap gains and dividends created a tax liability of $54,000. This is due to the long term cap gain and dividend rate increasing from 15% to 20% for taxpayers in the highest marginal bracket. Finally we have the medicare surtax. The trust would have to be 3.8% surtax on all investment income above the $12,150 threshold. This would be $12,068. We add all these taxes up and we have a total tax liability of $88,123. This is a 46% increase year over year on the same amount of income. So many trustees will be looking for strategies to help mitigate this tax impact.
One strategy maybe to pay out more or all of the income to the beneficiaries of the trust. This will have the benefit of having the beneficiaries pay the taxes at their rates. But you may just be passing the rising taxes to the beneficiaries. What if we could reposition some of these assets into a non-qualified variable annuity. The annuity would have the benefit of tax deferral and can limit the amount of ordinary income and cap gains/dividends that are created.
Trust income tax could increase by approximately 46% in 2016

7. Tax-Deferral Strategies for Irrevocable Trusts
AXA Equitable’s Tax-Deferral Strategies
Retirement Cornerstone – Investment Account
Retirement Cornerstone – Investment Account
Tax Deferred Strategies with 100+ Investment Options with option to fund living/death benefit in the future
AXA has three different strategies to allow you to take advantage of tax deferral – this presentation will focus on Retirement Cornerstone
Read Slide.

8. What is a Variable Annuity (VA)?
What’s a variable annuity?
A variable deferred annuity is a long-term financial product designed for retirement.
Simply stated, an annuity is a contract between you and an insurance company that lets you pursue the accumulation of assets through asset allocation and customized investment portfolios, and an optional guarantee. Asset allocation helps spread your investment dollars across different asset classes, to help manage risk and enhance returns. Through customization you choose according to your risk tolerance. The goal is to select a mix of asset classes that will help you meet your long-term investment goals.
Your portfolio is professional managed and closely monitored, including your portfolio’s performance and remains consistent with your investment goals. Ultimately, you pay an insurance company and in turn, the company agrees to provide lifetime income or a lump sum from your accumulated assets.
Read slide
Variable annuities offer optional riders at an additional cost.
We will discuss some of these on the following slide.
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9. A Few Things to Know… A Few Things to Know…
There are fees and charges associated with variable annuities, which include mortality and expense risk charges, administrative fees, investment management fees, withdrawal charges and charges for optional benefits.
In addition, annuity contracts have exclusions and limitations.
Withdrawals are subject to normal income tax treatment. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first.  If the contract is tax-qualified, generally all withdrawals are treated as distributions of gain.  Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 ½, may be subject to an additional 10% federal tax. Withdrawals will reduce the death benefit, living benefits and cash surrender value. Withdrawals will come from any gain in the contract first for federal income tax purposes.
Variable annuities are subject to investment risks, including the possible loss of principal invested. Guarantees described herein are subject to the claims-paying ability of the issuing company and do not apply to the subaccount investment options.
Read slide
Variable annuities offer optional riders at an additional cost.
We will discuss some of these on the following slide.
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10. Retirement Cornerstone – Investment Account
The Investment Account
The Protected Benefit Account
Access to 110+ investment options managed by well-known investment managers
Tax-deferred growth potential
Tax-free and cost-free investment option transfers
Guaranteed income for life
Help address inflation concerns with a treasury-linked roll-up rate as high as 8%
Annual Resets
Wealth transfer options
The Retirement Cornerstone® variable annuity contains two distinct accounts offering Investment Performance and Protection with Investment Performance within a tax-deferred single product.
- The Investment Account
- Offers an extensive platform of over 110 well-known investment portfolios from well-known investment managers.
- The Protected Benefit Account
- Includes the Guaranteed Minimum Income Benefit (GMIB) and Guaranteed Minimum Death Benefits. The GMIB ensures that you will be able to generate lifetime income no matter how your investment portfolios perform, and no matter how long you live, as long as you stay within certain withdrawal guidelines.
- As your needs change over the years, you can simply transfer assets from the Investment Account to the Protected Benefit Account.
Transfers from the Protected Benefit Account to the Investment Account are not allowed
Please note that transfers to the Protected Benefit Account are subject to age restrictions
ONE PRODUCT. TWO ACCOUNTS. FLEXIBLE STRATEGIES.

11. Retirement Cornerstone – Investment Account
Read Slide

12. Retirement Cornerstone – Protected Benefit Account
*Asset composition targets are subject to change
You will incur higher costs with the asset allocation portfolios than if you were to invest directly in the underlying investment portfolios. Investments are subject to market risk, will fluctuate and may lose value.

13. Retirement Cornerstone – GMIB
What is a Guaranteed Minimum Income Benefit?
It is an annuity feature, available at an additional cost, that can provide the annuity owner with a predictable future income* regardless of investment performance.
*Generally 4-6% of benefit base (The benefit base generally starts as the initial account value. As the contract allows, if the Benefit Base can roll up the allotted percentage (4-6%) on each contract anniversary date if elected by the contract owner. )
The GMIB rider fee is 1.15% (2.30% guaranteed)
Why use a Guaranteed Minimum Income Benefit?
It may provide some assurance that the annuity owner will be able to make the withdrawals and withstand a potentially negative market performance.
We will go into further detail on the next few slides…

14. Guaranteed Roll-up Rate
GMIB Multi-Year Lock
MULTI-YEAR LOCK
Period Length
Guaranteed Roll-up Rate
Based Upon
Rate-hold period
Length of withdrawal charge period
6% or higher – Deferral
5% or higher – Annual
Greater of rate-lock at contract issue or
treasury-tied rate
Variable period for all series
Following withdrawal charge period – age 95
3% - 8%
10-Year Treasury + 2% during Accumulation
10-Year treasury + 1% during distribution
Longer-term Lock-in Roll-up Rate lasting the length of the withdrawal charge period
Afterwards, your Roll-up Rate is Treasury-tied, as high as 8% and never below 3%
New Deferral Roll-Up Rates and Annual Roll-Up Rate are declared generally on a quarterly basis although they may change as frequently as monthly. Each year during the withdrawal charge period, clients get the greater of the rate at issue or the Treasury-tied formula rate.
The rollup ends on the contract anniversary after age 95 for GMIB and 85 for Greater of GMDB

15. û A Guarantee for Today and… Tomorrow! The GMIB Multi-Year Lock
Compound Growth (%) 8%
Variable
Multi- year rate lock
(4-9 years*) 3%
Benefit base rate
In response to the current low interest rate environment, Retirement Cornerstone® variable benefit base roll-up rates are to be locked in for the length of your withdrawal charge period (four to nine years depending on your series election). If interest rates rise, you can always take advantage of higher rates.
This cone chart depicts the Roll-up rate on Retirement Cornerstone. From left to right, the straight line represents the locked-in Roll-Up rate you will receive for the first two years of this contract. Then, notice the 3%-8% compounded growth on the benefit base you will receive thereafter.
Deferral Roll-Up Rate that compounds on benefit bases while you wait to take withdrawals
After the rate lock period, the minimum Deferral Roll-up Rate will be equal to an average of the 10-year Treasury rates +2.00% and will be renewable on each contract anniversary until the first withdrawal is taken from the Protected Benefit Account. It will never be less than 3% of more than 8%. “roll-up rate” is on the income-producing benefit base, which has no cash value.
Annual Roll-Up Rate on benefit bases that compounds after the first withdrawal, within the rate-lock period
After the rate lock period, if you decide to withdraw from the Protected Benefit Account Account, the formula for the minimum annual roll-up rate is equal to an average of the 10-year Treasury rates +1.00%. It will never be less that 3% or more than 8%. “Roll-up rate” is on the income producing benefit base, which has no cash value.
Time
Benefit Base – The starting value equals your initial investment or transfer to the Protected Benefit Account. It is guaranteed to compound by the annual roll-up rate each year.
*Roll-Up Rate – The deferral roll-up and annual roll-up rates both compound annually and locked for the length of the withdrawal charge period (four – nine years depending on your series election).
If Treasury Rates rise during the lock period, you can always capture higher rates. After the withdrawal charge period, the deferral roll-up rate will vary, is recalculated each contract year and is equal to the recent average 10-year treasury rates plus 2.00%. Once you begin taking income, the deferral roll-up rate no longer applies and AXA Equitable will credit your benefit base by an annual roll-up that is equal to recent average 10-year treasury rates plus 1.00%. Both the deferral roll-up and annual roll-up rates can be as high as 8% and will never be less than 3%.

16. Guaranteed Roll-up Rate
GMIB Two-Year Lock
TWO-YEAR LOCK
Period Length
Guaranteed Roll-up Rate
Based Upon
Rate-lock period
2 years
6% – Deferral
5% – Annual
Rate-lock at contract issue
Variable period
3rd contract anniversary – Up to age 95
4% - 8%
10-Year Treasury + 2% during Accumulation
10-Year treasury + 1% during distribution
Effective as of 1/1/15, new Deferral Roll-Up Rates and Annual Roll-Up Rate are declared generally on a quarterly basis although they may change as frequently as monthly.
Shorter-term Lock-in Roll-up Rate lasting for the first two contract years
Afterwards, your Roll-up Rate is Treasury-tied, as high as 8% and never below 4%
New Deferral Roll-Up Rates and Annual Roll-Up Rate are declared generally on a quarterly basis although they may change as frequently as monthly. Each year during the withdrawal charge period, clients get the greater of the rate at issue or the Treasury-tied formula rate.
The rollup ends on the contract anniversary after age 95 for GMIB and 85 for Greater of GMDB

17. û A Guarantee for Today … and Tomorrow! The GMIB Two-Year Lock
Compound Growth (%)
2 year rate lock 8%
Variable 4%
Benefit base rate
In response to the current low interest rate environment, Retirement Cornerstone® variable benefit base roll-up rates are to be locked in for the first two contract years, regardless of Treasury rates.
This cone chart depicts the Roll-Up Rate on Retirement Cornerstone. From left to right, the straight line represents the locked-in Roll-Up rate you will receive for the first two years of this contract. Then, notice the 4-8% compounded growth on the benefit base you will receive thereafter.
Deferral Roll-Up Rate that compounds on benefit bases while you wait to take withdrawals
Beginning with the third contract year, the minimum Deferral Roll-up Rate will be equal to an average of the 10-year Treasury rates +2.00% and will be renewable on each contract anniversary until the first withdrawal is taken from the Protected Benefit Account. It will never be less than 4% of more than 8%. “roll-up rate” is on the income-producing benefit base, which has no cash value.
Annual Roll-Up Rate on benefit bases that compounds after the first withdrawal, within the two year rate-lock period
Beginning with the third contract year, if you decide to withdraw from the Protected Benefit Account Account, the formula for the minimum annual roll-up rate is equal to an average of the 10-year Treasury rates +1.00%. It will never be less that 4% or more than 8%. “Roll-up rate” is on the income producing benefit base, which has no cash value.
Time
Benefit Base – The starting value equals your initial investment or transfer to the Protected Benefit Account. It is guaranteed to compound by the annual roll-up rate each year.
Roll-Up Rate – The deferral roll-up and annual roll-up rates both compound annually and are locked for the first two contract years, regardless of treasury rates. After two contract years, the deferral roll-up rate will vary, is recalculated each contract year and is equal to the recent average 10-year treasury rates plus 2.00%. Once you begin taking income, the deferral roll-up rate no longer applies and AXA Equitable will credit your benefit base by an annual roll-up that is equal to recent average 10-year treasury rates plus 1.00%. Both the deferral roll-up and annual roll-up rates can be as high as 8% and will never be less than 4%.

18. Benefit Base and Deferral Bonus Rate
Starting value equals your initial investment in the Protected Benefit Account- guaranteed to compound by the annual Roll-Up Rate each year.
Deferral Roll-Up Rate
Rate that AXA Equitable will compound your Benefit Base by each year, as long as you don’t take any withdrawals.
A flexible rate that is recalculated each contract year and is equal to the recent average 10-Year Treasury rates plus 2.00%.
Once you begin taking income the Deferral Bonus Roll-Up Rate no longer applies
AXA Equitable will credit the Benefit Base by an Annual Roll-Up that is equal to recent average 10-Year Treasury rates plus 1.00%, less withdrawals.
Both the Deferral Bonus and Annual Roll-Up rates can be as high as 8% and will not be less than 3% or 4%, depending on your GMIB election.
Today’s presentation will focus on 4 key strategies.
The first strategy will focus on using annuities within Irrevocable Trusts. These trust accounts are seeing a significant increases in taxes from last year to this year. These trusts may benefit greatly from the value of tax deferral within annuity contracts.
The second strategy is a twist on account ownership structure involving trust owned contracts that may open up some opportunities.
The third strategy involves using Retirement Cornerstone as a funding option for a defined benefit or defined contribution plan for a small business owner.
Let’s start with our first strategy, tax deferral for Irrevocable Trusts.

19. Advanced Annuity Strategies
Tax Deferral for Irrevocable Trusts
In-Kind Transfers of Trust Owned Annuities
Strategy for Qualified Plans
Today’s presentation will focus on 4 key strategies.
The first strategy will focus on using annuities within Irrevocable Trusts. These trust accounts are seeing a significant increases in taxes from last year to this year. These trusts may benefit greatly from the value of tax deferral within annuity contracts.
The second strategy is a twist on account ownership structure involving trust owned contracts that may open up some opportunities.
The third strategy involves using Retirement Cornerstone as a funding option for a defined benefit or defined contribution plan for a small business owner.
Let’s start with our first strategy, tax deferral for Irrevocable Trusts.
There is no additional tax benefit for contracts purchased in an IRA or other tax-qualified plans, since these are already afforded tax-deferred status. Thus an annuity should be purchased in an IRA or qualified plan inly if the client values some of the other features of the annuity and is willing to incur additional costs associated with the annuity to receive such benefits.

20. Typical Titling of an Trust Owned Contract
Owner 
Trust
Annuitant
Surviving Spouse
Beneficiary
The most common titling structure for an irrevocable trust is illustrated on the slide. The irrevocable trust is the owner and beneficiary and the surviving spouse is the annuitant. All living and death benefits on the contract would be based on the life of the annuitant.

21. Trust Planning Case Study
Client – Age 85 years old
Beneficiary – 60 year old Daughter
Investment Goal
Provide Guaranteed Income for Mother
Provide Efficient Wealth Transfer to Daughter at Mother’s Death
Planning Problem
Mother is too old to purchase a living or death benefit
Let’s take a look at case study in which an alternative structure could be used. In this scenario we have an 85 year old client. Read scenario on slide.
Strategy: Own Annuity Contract in Revocable Trust

22. Guaranteed Minimum Death Benefit
What is an Enhanced Death Benefit?
It is an annuity benefit, available at an additional cost, that can provide protection to beneficiaries regardless of market performance.
The GMDB rider fee is 0.9%
Why use an Enhanced Death Benefit?
It may provide some assurance that there will be protection to provide for beneficiaries in case of a premature death.
*Optional Riders are subject to additional cost and/or limitations and restrictions
Read Slide.
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23. Child/Beneficiary of Trust
PLR
Owner 
Irrevocable Trust
Annuitant
Child/Beneficiary of Trust
Beneficiary
A Child can be named as the annuitant with the B Trust as owner and beneficiary.
Upon the B Trust’s termination, or if the B Trust allows for “in kind” distributions to the children, the deferred variable annuities may be transferred from the B Trust to the child (income tax may not be triggered).*
The annuity will remain income tax deferred until death of the respective owner/annuitant, or until voluntary distributions are made from the contracts.
*Private Letter Ruling
While a Private Letter Ruling may not be cited as legal authority, they are often viewed by tax advisors as Treasury’s current view of income tax matter.
Private Letter Ruling

24. 1. 2. 3. 4. 5. 6. Plan in Action Owner- Revocable Trust
Annuitant- Child
Beneficiary- Revocable Trust 2.
Income Paid to Mom through Revocable Trust 3.
Mom Passes Away
Revocable Trust become Irrevocable registered under Trust TIN 4.
Owner- Irrevocable Trust
Annuitant- Child
Beneficiary- Irrevocable Trust 5.
Trustee changes owners
Owner- Child
Beneficiary- Grandchild 6.
Ownership change not taxable
Benefit Base carries forward
Child can name own beneficiary
So let’s take a look at this strategy in action.
An annuity contract is owned by the revocable living trust with the child as the annuitant and the revocable living trust as the beneficiary. Since the child is the annuitant they can purchase both living and death benefit riders.
Since it’s Mom’s revocable trust the trust can take income from the annuity contract and distribute it back to Mom if she needs it.
In step 3 Mom passes away. The revocable trust becomes irrevocable after her death. The trustee of the trust would now register the trust as irrevocable under the trust’s TIN. The annuity contract is now owned by the irrevocable trust, the same annuitant as before, and the irrevocable trust as the beneficiary.
In Step 5 the trustee now will change the ownership of the annuity contract from the irrevocable trust to the child who is also the annuitant. The daughter now has a normal non qualified annuity contract in which she is the owner and annuitant. The daughter can now add a beneficiary and in this case names her child as the beneficiary.
Since the ownership change was done by the irrevocable trust and not an individual the ownership change is a non-taxable event. Since the daughter has remained as the annuitant on the contract from the beginning any benefit bases for the income benefit or death benefit will carry forward to the daughter.
So in the end the Mother was able to purchase an annuity contract within her revocable living trust. It served the dual purpose of providing her guaranteed income if she needed it and provided a wealth transfer vehicle to her daughter. Additionally the daughter would benefit from the income and death benefit riders available within Retirement Cornerstone.

25. Advanced Annuity Strategies
Tax Deferral for Irrevocable Trusts
In-Kind Transfers of Trust Owned Annuities
Strategy for Qualified Plans
Today’s presentation will focus on 4 key strategies.
The first strategy will focus on using annuities within Irrevocable Trusts. These trust accounts are seeing a significant increases in taxes from last year to this year. These trusts may benefit greatly from the value of tax deferral within annuity contracts.
The second strategy is a twist on account ownership structure involving trust owned contracts that may open up some opportunities.
The third strategy involves using Retirement Cornerstone as a funding option for a defined benefit or defined contribution plan for a small business owner.
Let’s start with our first strategy, tax deferral for Irrevocable Trusts.

26. Strategy for Qualified Plans
Case Study:
Qualified Plans
Client Profile:
Small business owners with existing profit sharing or defined benefit plans.
Business Owner is sole participant or there are only a couple of other participants.
Plan assets are easily separated to each participant.
Read Slide.
There is no additional tax benefit for contracts purchased in an IRA or other tax-qualified plan, since these are already afforded tax-deferred status. Thus, an annuity should be purchased in an IRA or qualified plan only if the client values some of the other features of the annuity and is willing to incur any additional costs associated with the annuity to receive such benefits.

27. Defined Benefit Plans – Larger Annual Contributions
Sample Contributions (rounded to nearest $500)
Age
Retirement Age
Maximum Benefit (2016)
Initial Contribution 45 62
$210,000
$51,900 50
$101,500 52
$138,500 55 65
$129,300 60
65*
$105,000
$178,400
Why are defined benefit plans appealing as retirement vehicles to small business owners? Simply put the defined benefit plan may allow the small business owner to contribute significantly larger contributions than they could in other retirement vehicles. These larger contributions will allow them to accumulate more assets for retirement as well as create a higher tax deduction for these contributions. The slide above shows some estimated initial contributions to a defined benefit plan. For example if a 52 year old business owner established a defined benefit plan for himself this year and planned on funding the plan for 10 years and used the maximum defined benefit of $210,000 his initial contributions would be $138,500. By comparison a contribution to a SEP IRA or Profit Sharing Plan would be capped at $52,000.
*Benefit reduced because of years of participation
Source: Dedicated DB Services

28. Strategy for Qualified Plans using Retirement Cornerstone1.
ABC Defined Benefit Plan
$750,000 in Assets
$100,000 in Annual Contributions 2.
Owner- $500,000 Plan
Annuitant- Business Owner
Beneficiary- Plan 3.
$250,000 Outside Retirement Cornerstone cover fees and other liquidity issues 4.
$100,000 Annual Contribution for 10 years
$80,000 Ret. Cornerstone Contract
$20,000 in other plan assets 5.
$1,300,000 Total Contributions into Retirement Cornerstone
Benefit Base- GMIB/GMDB- 4-8%, 10yr treasury +2%
Owner Terminates Plan 6.
Transfer Annuity to IRA for Business Owner
All Benefit Bases carry forward
Biz Owner – Owner and Annuitant
Name New Beneficiary
Let’s take a look how a small business owner could leverage Retirement Cornerstone within his Defined Benefit Plan.
In this example the client has an existing defined benefit plan with himself as the only participant. The plan currently has $750,000 in assets and is scheduled to make $100,000 in contributions per year for the next 10 years. The client elects to invest $500,000 into a Retirement Cornerstone contract. The plan would be the owner and beneficiary and the client would be the annuitant. The owner elects to purchase the Guaranteed Minimum Income Benefit and the Greater of Death Benefit. This would leave $250,000 in assets for the plan outside of the annuity contract.
The business would contribute $100,000 per year to the defined benefit plan. $80,000 of this contribution would be added to the Retirement Cornerstone annuity. 10 years later $1.3 million would have been contributed to the annuity product. The income and death benefits would be crediting a minimum of 4% and a maximum of 8% to the annuity contract each year. The rate would tied to the 10 year treasury +2%. At this point the owner elects to terminate the defined benefit plan.
At this point we could simply change the annuity contract from being owned by the defined benefit plan to being owned by the client in their IRA. All of the benefit bases for the income and death benefits would carry forward to the IRA contract. The individual would be the owner and annuitant of the contract and could name their own beneficiaries.
The benefit of this strategy is the ability to contribute significantly more assets to a retirement vehicle for you. It is important to note that if there were other eligible employees in the company the company would need to make comparable contributions to the other employees based on their age and salary.
The GMIB ensures that you will be able to generate lifetime income no matter how your investment portfolios perform, and no matter how long you live, as long as you stay within certain withdrawal guidelines.

29. Important Information
Retirement Cornerstone is sold by prospectus only. You should carefully consider your investment objectives and charges, risks and expenses before investing. For a prospectus containing this and other information. Please read the prospectus carefully before investing or sending money. Variable Annuities are long-term investment products designed for retirement purposes. Variable Annuity contract values are subject to fluctuation, investment risk, and possible loss of principal. Variable annuity contracts have limitations, mortality and expense risk charges, account fees, investment management fees and administrative fees. Certain types of contracts, features and benefits will not be available in all jurisdictions. There is no additional tax benefit for contracts purchased in an IRA or other tax-qualified plan, since these are already afforded tax-deferred status. Thus, an annuity should be purchased in an IRA or qualified plan only if the client values some of the other features of the annuity and is willing to incur any additional costs associated with the annuity to receive such benefits. AXA Equitable, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties. Your clients should consult their own independent advisors as to any tax, accounting or legal statements made herein.

30. Thank you