1. Big Tax Savings with Retirement Plans Presented by: Eric Petersen Hicks Pension Services

2. History of Pension Plans 1875 1st Pension plan created 1900 1 st Union pension plans 1921 1 st retirement plan for Federal Workers 1935 Social Security Act introduced – Retirement age was 65 but life expectancy was only 63 1942 1 st Federal law allowing employers to deduct pension plan contributions 1960 Start of smaller employers establishing plans. 1974 ERISA pension law passed. 1978 401-k provision added Now Only 12% of all smaller employers offer plans.

3. DB vs. DC Plan Defined Contribution plan limits the amount of money going into the plan.  52,000 per year  57,500 if over 50 years old Defined Benefit limits the amount of money coming out of the plan.  210,000 dollars per year.  Amount allowed at age 65 is 2.4MM

4. Cash Balance Plan Same as a Defined Benefit Plan  Works best when there are several employees in the plan.

5. 2.5 MM Age 65 Age 55 250,000 dollars per year How the plan works

6. 2.5 MM Age 65 Age 55 190,000 dollars per year 5% per year

7. 2.5 MM Age 65 Age 45 72,000 dollars per year 5% per year

8. 2.5 MM Age 65 Age 45 72,000 dollars per year Over Funded Fully Funded Under Funded Funding Range Plan assets must be within 50% of the fully funded level

10. Investing in a Defined Benefit Plan An over-funded plan is penalized Under funded plans are required to make up the difference Predictability is very important Trust should aim for a 5 % return per year Most plans are not invested properly

11. What to watch out for! Client should be 50 or older. Plan should run for at least 3 years. Must file forms with Government Must not have older employees.

12. Add a 401-k deduction to the plan Increases overall deductible amount by $ 23,000 per year plus optional 6% of pay for Profit Sharing Adds a little flexibility DB-k

13. Standard Profit Sharing Plan or SEP NameAgeSalaryPro Rata %Pro Rata $ Owner60260,00020%52,000 Employee2025,00020%5,000 Employee3540,00020%8,000 Employee5560,00020%12,000 Total 77,000 % to Owner68%

14. Cross Tested 401-k Profit Sharing Plan NameAgeSalary401 k Contribution Cross-Tested % Employer Contribution Cross- Tested $ Owner60$260,00023,000$ 34,500$57,500 Employee20$25,000$ 1,250 Employee35$40,000$ 2,000 Employee55$60,000$ 3,000 Total $370,000$63,750 % to Owner 91%

15. Cash Balance/401-k Combo Plan NameAgeSalaryDB Cont.401(k)Profit Sharing Total Annual Contribution Owner60200,000 $23,00012,000235,000 Employee2025,0006,500 3,1509,650 Employee3540,0006,500 2,2508,750 Employee5560,0006,500 2,5809,080 Total 265,480 % to Owner 89 %

16. Target Market Small business owners with few or no employees Looking for larger tax deductions. Income in excess of 200,000 dollars Maxed out SEP clients

17. Thank you