401(K) PLANS Presented by: Mary Read, CPC, QPA National Director of Qualified Plan Marketing For Financial Professional Use Only. Not For Use With the.

401(K) PLANS

Presented by:

Mary Read, CPC, QPA

National Director of Qualified Plan Marketing

For Financial Professional Use Only. Not For Use With the Public.

DISCLOSURE

2

This material is intended as a general discussion of

qualified plan concepts and strategies. It is not

intended as specific advice concerning any

individual legal, tax or accounting matter. Alliance

Benefit Group-Pentegra does not provide legal, tax

or accounting advice. Any questions regarding your

individual situation should be directed to your

personal advisor on such matters.

For Financial Professional Use Only- Not For Use With Public

TYPES OF RETIREMENT PLANS

Defined Contribution Contribution is limited Retirement benefit is unknown Benefit depends on the amount of

contributions made and any growth of plan investments

─ Profit Sharing

─ Money Purchase

─ 401(k)

─ Target Benefit

3For Financial Professional Use Only- Not For Use With Public

4For Financial Professional Use Only – Not for the Public.

401(k) Plan Contributions

25% of total participating payroll

-Matching contributions-Qualified non-elective

contributions-Profit sharing contributions

Does NOT include employee salary deferrals

Contribution Limit100% of pay, maximum

$50,000

-Matching contributions-Qualified non-elective

contributions-Profit sharing contributions-Salary Deferrals

DOES include employee salary deferrals

Allocation Limit

What is a 401(k) Plan?

Eligible employees can save for their retirement by making salary deferrals

─ pre-tax income

─ after-tax income

─ combination of both Can include an employer matching or non-elective

contribution

discretionary profit sharing contribution.

For Financial Professional Use Only – Not for the Public. 5

401(k) PROFIT SHARING PLANS

Traditional 401(k)

Safe Harbor 401(k)

Solo-k Roth 401(k)



401(k) FEATURES

Pre-tax employee salary deferrals

– Catch-up contributions for those age 50 and older

Roth 401(k) Deferrals

Optional tax-deductible employer contributions

– Matching contributions

– Qualified non-elective contributions

– Profit Sharing contributions

Tax-deferred growth*

*Distributions from a 401(k) are taxed as ordinary income and, if taken prior to age 59 ½ may be subject toan additional 10% federal income tax penalty.

TRADITIONAL 401(k) PLANS

Eligibility: Age 21 and 1 year of service (1000 hours worked annually)

Employer Contributions subject to vesting schedule

Subject to Average Deferral Percentage Test



401(k) SALARY DEFERRAL PLAN

Type of plan Limit 2012

401(k) $17,000 403(b) $17,000 SARSEP $17,000 457 $17,000 SIMPLE $11,500

Salary Deferral Limit

401(k) SALARY DEFERRAL PLAN


Catch Up Deferral

Eligible employees

- Must attain age 50 by December 31

Plan must permit

401(K) Catch up contribution$5,500

SIMPLE Catch up contribuiton$2,500

Special Rule 403(b) Participants

A special rule applies to participants in a 403(b) plan who sponsor their own Defined Contribution

plan

– Maximum allocation includes salary deferrals made in a 403(b) plan

Example:

Salary deferral in 403(b) $16,500

Profit sharing contribution $33,500

Total$50,000


ADP TEST

The HCEs’ average may only exceed the NHCEs’average (for both the ADP and ACP tests) by specific limits summarized as follows:

NHCE Percentage Maximum HCE Percentage

2% or less NHCE % × 22%–8% NHCE % + 2more than 8% NHCE % × 1.25


CASE STUDY INDUSTRIAL DESIGN, INC.

Age Compensation

Owner A 61 $250,000

Owner B 48 250,000

Employee 1 32 60,000

Employee 2 62 30,000

$590,000


This example is purely hypothetical and for illustrative purposes only. The example shown does not represent any particular plan and your results will differ.

401(k)

Deferral Catch-up

3% Matc

h PS Total

Owner A $17,000 $5,500 $7,500$25,50

0 $55,500

Owner B $17,000 $0 $7,500$25,50

0 $50,000

EE 1 2,880 ? $1,800 $2,836 $4,636

EE 2 1,440 $0 $900 $1,418 $ 2,317

Total $38,320 $5,500$17,70

0$55,25

4 $112,453



Owner Deferral 6.8%Needed Rank and file Deferral 4.8%

Safe Harbor 401(k) Plans

Avoids ACP and ADP Tests

Pre-Tax/Roth Salary Deferrals

Mandatory Employer Contribution

100% immediate vesting of mandatory employer contribution

Employer Safe Harbor Contributions also used to satisfy Top Heavy and Gateway minimums

Optional Profit Sharing Contributions which can be subject to a vesting schedule

For Financial Professional Use Only – Not for the Public.15

Safe Harbor 401(k) Plans

Employer must contribute either

– Match: 100% on deferrals up to 3% of pay and 50% on deferrals between 3 and 5% of pay;

or

– Non-Elective: 3% of pay for all eligible participants


SAFE HARBOR 401(k)

Deferral Catch-up

3% FS PS Total

Owner A $17,000 $5,500 $7,500$25,50

0 $55,500

Owner B $17,000 $0 $7,500$25,50

0 $50,000

EE 1 $0 $0 $1,800 $1,036 $2,836

EE 2 $0 $0 $900 $518 $1,418

Total$17,70

0$52,55

4 $109,754



Employer ContributionOwners receive 22.2% and 20% of compensationContributed for employees 4.734% of compensation

18

401(k) FOR ONE

401(k) for One

For highly compensated employees only

Combine with a profit sharing contribution, or with a separate defined benefit plan

Reduced 401(k) administrative fees

For Financial Professional Use Only- Not For Use With Public 18

401(k) FOR ONE

ProfitSharingContribution(25% of Pay)

401(k) Deferral$17,000$25,000

$47,500Compensation $100,000

The above example is purely hypothetical and for illustrative purposes only. The example shown here does not represent the actual results of any particular plan and your results will likely differ.

Catch Up Deferral $5,500(over Age 50)

For Financial Professional Use Only- Not For Use With Public 19


RECORDKEEPING

Investment Platform

Employee Access

Individual Accounts


ADMINISTRATION

401(a)(4) Nondiscriminatory Allocations 401(a)(9) Compensation Limitation 402(g) Excess Deferrals 404 Maximum Deductible Contributions 410(b) Minimum Coverage Testing 414(s) Testing for non-safe harbor compensation ADP/ACP Testing 415 Annual Addition Testing 416 Top Heavy Testing Nondiscriminatory Benefits/Rights/Features Determination of Highly Compensated Employees Comprehensive compliance reporting package Analysis of testing results Corrective scenarios in the event of test failures Preparation of Government filings

- IRS Form 5500 and applicable schedules (A, C, D, E, G, H, I, R, MB, SB, SSA) - Summary Annual Report (SAR) - IRS Form 5558 (Extension for Form 5500) - IRS Form 5330 -Tax reporting, including Form 1099-R, 1096, 945 and 1099-MISC

22

ALLIANCE BENEFIT GROUP-PENTEGRA

Outstanding Personal Service Industry Experts No Commission Splits No Hidden Fees

Lori J. CarpenterAdvisor Relationship Manager(800) 255-8678Direct: [email protected]

Mary Read CPC, QPANational Director of Qualified Plans [email protected]

For Financial Professional Use Only – Not For Use With Public

Training, custom plan proposals, prospecting and marketing materials are free. We are only a phone call away!

CIRCULAR 230 DISCLOSURES

The above information is not intended or written to be used, and it cannot

be used, by any person for the purposes of avoiding any penalty that may

be imposed by the Internal Revenue Service.

In the event the advice is also considered to be a “marketed opinion” within

the meaning of the IRS guidance, then as required by the IRS, please be

further advised of the following:

The above advice was written to support the promotion or marketing of the

transactions or matters addressed by the written advice and, based on the

particular circumstances, you should seek advice from an independent tax

advisor.

23For Financial Professional Use Only- Not For Use With Public

401(K) PLANS Presented by: Mary Read, CPC, QPA National Director of Qualified Plan Marketing For Financial Professional Use Only. Not For Use With the.

Documents

plan contributions

public slide

financial professional

contribution contribution

salary deferral limit

employer contributions

b plan example

deferrals optional