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© copyright 2014 Business Planning Group

BusinessPlanningGroup.com

__Agent Group Name___Presents

Section 79 Permanent PlanImplementing An IRS Compliant

Section 79 Permanent Plan

Employee Benefit Program

Developed For

Client Company Logo

Date



Today’s Agenda

• Product review

• How to take advantage of this IRC

compliant, tax-advantaged program.

• Discuss how to adopt and introduce this

valuable benefit plan to your employee

organization.



Product Review



What is Section 79?

Most large employers offer group term life insurance to their employees. The amount typically provided is $50,000 of “free” Group Term Life coverage to their employees. This is part of Section 79. Under IRS section 79 there are two other options that employers can offer to their employees.

Employees have the option to elect a salary reduction for a portion of their payroll; similar to a 401(k) plan into the full group term or the permanent benefit option of Section 79. When the employee makes a contribution, a portion will be counted as income and be taxed currently with the remainder, growing on a tax deferred basis.

The permanent option is traditionally used by highly compensated employees, because of the initial tax savings, future tax-free income and other benefits.

3 Options for Employees

$50k employer paid group term

life insurance

Full employer paid group term

life insurance

Section 79 permanent insurance benefit, employee salary

reduction

Not taxable to employee for

coverage

Employee is taxed on benefit above $50k of

coverage

Employee reaps initial tax advantage

on portion of contribution



Why Use Permanent Section 79?

• Recruit better employees

• Differentiate __client co name__ as the

employer with the best retirement

benefits.

• Retain Key Employees

• Tax-advantaged “pre-tax” contributions.

• Tax-deferred growth.

• Only available as a company benefit.

• Reward Participants

• Reduces participants W-2 wages and

associated taxes.

• Tax-free distribution at retirement.



A Plan Example

$320k Gross Income

$100k investment

A Permanent Section 79 plan can be a

powerful addition to an employee fringe

benefit package. Here is an example of

how the plan can work for a male, earning

W-2 wages of $320,000, age 45 years old,

non-smoker with preferred rating:



Plan Analysis

Taxable equivalent required to generate $149,641 per year.

Illustrated annual tax-free income @ age 65



When __client co name__ adopts a permanent

Section 79 plan, there are several significant

employer advantages:

• All contributions (EE and ER) made to the plan are

paid by __client co name__ and are 100% deductible

by __client co name__ in the year paid.

• Payroll taxes owed by __client co name__ are

reduced by the reduction of participant(s) W-2

wages.

There are also many employee advantages:

• Plan uses pre-tax dollars with only a portion of plan

contributions includible in the participant’s income.

• Plan assets accumulate on a tax-deferred basis.

• Plan includes accelerated benefit “living” riders.

• In the event of the participant’s death, a tax-free

survivor benefit is provided.

• Retirement income will be received tax-free.

Employer and Employee Advantages



Investment Options

Employees strive to create adequate retirement funds and personal

wealth. Only an IRS compliant Section 79 Permanent plan lets the

employee invest an almost unlimited annual amount utilizing pre-tax

funds.

An investment feature Not an investment feature

• ABR benefits are “accelerated benefit rider” benefits. These are add-on coverage to certain Life Insurance Policies. HIPAA exempts from income tax, accelerated death benefits from life insurance contracts received on behalf of a chronically or terminally ill insured. A terminally ill person is one who has been certified by a physician as having a physical condition or illness that can reasonably be expected to result in death within two years. A chronically ill individual is one certified by a licensed health care practitioner as being unable to perform at least two activities of daily living.



Almost all of the investments that people make today use after-tax $. If you are in a top tax bracket, Federal income tax makes anything you buy with after-tax $ carry a 67% tax premium over the price of the investment. That means your $500K house really costs $835K in after-tax $ and your $50K car really costs $83.5K. Only an IRS Section 79 Permanent plan lets employees invest an almost unlimited annual amount utilizing pre-tax funds.

Investing With Pre-tax $

1. Assumes 40% Federal income tax-bracket. Does not consider payroll and Medicare taxes.2. Section 79 plans typically charge back only @ ~ 60% of plan cost back to the client W-2

which will reduce W-2, in this case, $40k. Income tax on $60K = $24K. Income tax savings on $40k = $16K.

3. Wage reduction assumes you are still in the same tax-bracket. Depending on the investment size, this may reduce tax bracket which will affect all taxable wages.

4. Payroll tax savings estimated at an average of @ 4.0% on top earner.



Where Will Taxes Go Next?

Source: Verisi Data Studio - http://www.verisi.com/resources/us-marginal-tax-rates.htm

As our government struggles with deficits and spending

levels, tax rates will no doubt be reevaluated and adjusted.

Now at historically low levels, if tax rates go higher, the tax

mitigation and tax-free distribution benefits of a Section 79

Permanent plan will make this product an even more

important retirement investment strategy option.

2014 rate 39.6%



Adopting

A Section 79 Plan



_ Client Co Name___ and __Agent Group__ create a

plan for the introduction of Section 79 permanent life

insurance benefits to employees of _ Client Co

Name___ .

_ Client Co Name___ adopts the plan and announces

the plan to _ Client Co Name___ employees.

__Agent Group__ will meet with and introduce the plan

options to _ Client Co Name___ employees.

__Agent Group__ will work _ Client Co Name___ Human

Resources department to establish a salary reduction

program for the new plan.

As new employees join the organization, __Agent

Group__ will meet with them and introduce the plan

and employee options.

Adoption Process



_Client Co_

Corporation

adopts

Permanent

Section 79

Plan.

Communicate

New Permanent

Section 79 Plan

to EE’s

2.

3.

__Client Co__

current term

offerings

already fall

under Section

79 OF IRC.1.

Adoption Process



Plan Adoption



Section 79 Corporate Sponsor

Annual Administrative Fee

$350.00 per participant per funding year

As the sponsoring company, ___________________ agrees to pay $350.00 per participant per funding year for participation in the ____________________ Permanent Section 79 plan. Business Planning Group will provide the financial; accounting for the program’s tax deductibility at the end of each year’s premium funding. The accounting documents sent to the client will include an estimated annual premium report (in October of each funding year) and a final premium report (issued in January after year-end). This premium report is to be figured into the employee’s W-2 in accordance with US tax code regulations. Business Planning Group will invoice the sponsoring for this administrative activity in October of each year, prior to the year-end close of business.

I agree to the above conditions.

_______________________________________ ____________Corporate Sponsor

Date

Plan Administration



Implementing a Section 79

Permanent Plan



Implement Individual Plans

Individual Plan

design and

presentation to

key executives

and interested

EE’s.

Implement

individual

Plans

Contributions

complete in 5

years. Add new

plans.

2.

3.

6.

Plan

announcement

with Employee

communications

and meetings.1.

Plans paid

through salary

reduction - Just

like 401K plans. 4.

Annual Tax

Statements and

Review Meetings.

Meet with new

EE’s.5.



Introducing the Plan to Employees

__ Agent Group Name __ will support _Client Co

Name__ and employees to ensure that your new

plan is virtually seamless to implement.

Employees will be able to meet with __ Agent

Group Name __ associates and ask questions; all

in a way that suits their work schedules:

• In-person group meetings and seminars.

• Webinars or conference calls.

• Online employee information package.

__ Agent Group Name __ will meet with employee

tax advisors as needed to answer plan questions.



Employee Communications

• Prepare annual program communications -

• Specific invitation to “key” employees from CEO/CFO

and __ Agent Group Name __ (draft letters follow).

• General employee invitation from HR Department

and __ Agent Group Name __ .

• __ Agent Group Name __ will follow up with all interested

employees to set up meetings, answer questions about

their permanent Section 79 plan and enroll interested

employees.

• __ Agent Group Name __ will work with the HR team to

ensure that enrolled plans are set up for payroll

deduction.

• __ Agent Group Name __ will meet and follow up with

employees as required regarding future plans and plan

communication.

• __ Agent Group Name __ will also meet with future new

employees as required to enroll them into the Section 79

Permanent plan.



Dear (Key Employee First Name), _ Client Co Name___ is pleased to introduce you to a new employee benefit, the permanent Section 79 plan. I have reviewed this benefit personally and believe that it will be of great interest to you for the creation of significant retirement assets, protection for your family and assets during your working years and finally, mitigation of your current tax liabilities and finally, tax-free distribution upon retirement. This tax-advantaged benefit will be available to all eligible employees but does require a minimum pre-tax contribution for 5 years. Of course, the larger the contribution, the greater the benefits, both now and in the future. Here are the important features of our new benefit: • Your contributions are partially funded with pre-tax earnings (this reduces your adjusted

gross income and current tax liability).• Plan provides tax-deferred growth.• There is penalty-free access to funds before age 59½.• The plan offers an accelerated death benefit for chronic or terminal illnesses.• There is a tax-free death benefit for surviving beneficiary(ies).• Future tax-free income distribution

(Key Employee First Name), I would like to schedule an appointment for you with our benefit provider, _Agent Group Name__so that you can evaluate the impact of this new benefit program as a part of your retirement and wealth building activities. Please expect to be contacted by:

Name of contact at agent groupAddressPhone #WebsiteOn behalf of the Management team of here at _Client Company Name__, we thank you for your many contributions to the success of our organization. I sincerely hope that you will take advantage of our new permanent Section 79 plan benefit.

CEO signature

CEO Letter to Key Employees



Dear Employee Name, _ Client Co Name___ is pleased to introduce you to a new employee benefit, the permanent Section 79 plan. Management and HR have reviewed this benefit and believe that it will be of great interest to you for the creation of significant retirement assets, protection for your family and assets during your working years, mitigation of your current tax liabilities and finally, tax-free distribution upon retirement. This tax-advantaged benefit will be available to all eligible employees but does require a minimum pre-tax contribution for 5 years. Of course, the larger the contribution, the greater the benefits, both now and in the future. Here are the important features of our new benefit: • Your contributions are partially funded with pre-tax earnings (this reduces your adjusted

gross income and current tax liability).• Plan provides tax-deferred growth.• There is penalty-free access to funds before age 59½.• The plan offers an accelerated death benefit for chronic or terminal illnesses.• There is a tax-free death benefit for surviving beneficiary(ies).• Future tax-free income distribution

Enclosed, you will find additional information regarding this valuable new benefit. If you would like to schedule an appointment with our benefit provider, , _Agent Group Name__, you can contact them at:

_Agent Group Name____Address __Phone # ____Website__

On behalf of the Management team of here at _Client Company Name__, we thank you for your many contributions to the success of our organization. I sincerely hope that you will take advantage of our new permanent Section 79 plan benefit.

HR management signature

HR Employee Letter



Employee Enrollment

Information



Employee Enrollment Information

Employees will be able to get information to guide their decisions on their Section 79 Permanent plans both online or in person.

__Agent Group Name __ has built a _Client Co Name __ webpage specifically for employees of _Client Co Name __ to learn about Section 79 Permanent plans and to request information. The webpage URL is:

Webpage URL

Topics include:

1. Welcome letter

2. What is a Section 79 Permanent Plan?

3. View an online webinar

4. Review a sample plan analysis.

5. Next steps

6. Frequently asked questions.



Coverage Options Form

Employee Coverage Selection



Establishing Salary Reduction



Sample Monthly Invoice showing 5 employees

Establishing Salary Reduction

• Establish EE eligibility, present optional plans to EE’s

• Sign up interested EE’s

• Select funding options (semi-weekly, monthly, annually or other)

• Company makes plan payment, receives 100% deduction at time of payment.

– Make ups must be through salary reduction.

– EE and ER are required to pay payroll taxes on the W-2 amount.

– EE payroll taxes must be through salary reduction.

– All funding must be complete by December 31 of the plan year.

• Annual enrollment for new EE’s



Establishing Pay Options

Pay Options

Bi-weekly Monthly Annually

Example of a $50,000 Contribution/year $50,000 $50,000 $50,000

Contributions per pay period $1,923 $4,166 $50,000

Employee payroll tax per period * $96 $192 $2,295

Catch up withholding for plans started after Jan. 1

Other withholding elements

Total withholding

* $50,000 contribution X 60.0% (est. taxable percentage) = $30,000 X 7.65% payroll tax.



Tax Forms



Estimated Tax Forms are sent out to participants each October

Estimated Tax Forms



Final Tax Forms are sent out to participants each January

Final Tax Forms



_ Client Co Name___ Tax Form 1120



Fill Out 1040 Forms



National Life Group is a diversified family of financial service

companies that offer a comprehensive portfolio of life insurance,

annuity and investment products to help individuals, families and

businesses pursue their financial goals.

National Life Group, a Fortune 1000 company, serves 786,000

customers. With 2013 revenue of $2 billion and net income of $142

million, members of National Life Group employ roughly 900

employees, with most located at its home office in Montpelier,

Vermont.

The Group is made up of its flagship company, National Life

Insurance Company, founded in Montpelier, Vermont in 1848; Life

Insurance Company of the Southwest, founded in 1955, Addison,

Texas, and Sentinel Investments and Equity Services, Inc., all based

in Montpelier. National Life Group has successfully forged a strong

identity as a product innovator offering personalized service.

Financial Strength Ratings for National Life Insurance Co. and Life

Insurance Company of the Southwest are “A” (Excellent) by A.M.

Best, “A” (Strong) by Standard and Poors and “A2” (Good) by

Moody’s.

National Life Group



__Agent Group name__ assists organizations in

understanding and implementing executive and

employee benefit plans, deferred compensation plans,

qualified retirement plans, premium financing programs

and captive insurance programs. These programs assist

employees within client organizations in building

personal wealth and reducing personal taxes while

supporting the recruiting, retaining and rewarding of

successful employee teams.

About __Agent Group name__

Contact __Agent Group name__

__Agent Group contact information___

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Documents

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plan example

valuable benefit plan

permanent insurance

investmenta permanent

permanent option

portion of plan cont

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© copyright 2014 business planning group businessplanninggroup.com page 1 __agent group name___...

© copyright 2014 business planning group businessplanninggroup.com page 1 agent group name_...