1/15 24077-15a for broker/dealer use only. not for use with the public. a unique retirement plan for...

1/1524077-15A For broker/dealer use only. Not for use with the public.

A Unique Retirement Plan for the Sole Proprietor

Individual(k)

No bank guarantee • Not a deposit • May lose value • Not FDIC/NCUA insured • Not insured by any federal government agency

For broker/dealer use only. Not for use with the public.

Please Note

This presentation provides general information about some sole proprietor or owner-only business retirement plans. Pacific Life, their affiliates, distributors, and respective representatives do not offer legal or tax advice. Clients should consult their attorneys and tax advisors as to the applicability of this information to their specific circumstances and for complete, up-to-date information concerning federal and state tax laws.

Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Mutual funds are offered by Pacific FundsSM.

Overview—market opportunity Individual(k) plans defined

– Eligibility– Contributions– Loans– Rollovers

Q & A Getting started


Agenda

Aging of society

Longer life expectancy

Working past normal retirement age

Rising healthcare expenses


Overview


Retirement Plans for the Self-Employed

Individual(k) SIMPLE IRA SEP-IRA SIMPLE 401(k) Safe Harbor 401(k)

Profit sharing Defined benefit Cash balance Nonqualified deferred

compensation


401(k)-based plan Designed exclusively for

owner-only employers Popular after tax-law changes

effective since 2002

What Is an Individual(k)?

Employee salary deferral limit is 100% of compensation up to $18,000

Catch-up contribution (age 50 and older) is $6,000 Profit-sharing deduction limit is 25% Total contribution per employee is $53,000 Employee salary deferrals are not subject to the IRC 404

deduction limit


Individual(k)

These increases in contribution limits, including catch-up for employees age 50 and older, were enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). These increases became effective on 1/1/02 and were scheduled to sunset after 12/31/10. H.R.4, the Pension Protection Act of 2006 (PPA), repeals the sunset provisions of EGTRRA as they relate to pension and IRA provisions. Increases in the limits on contributions, including catch-up for employees age 50 and older, under 401(k) plans were made permanent.


Owner(s) and spouse(s)

Owner(s) with excludable employees

Corporations

Partnerships

Sole proprietorships

Types of businessesDesigned for

owner-only businesses

Who Can Establish an Individual(k)?

Employees younger than age 21

Employees with less than one year of service

Employees who work fewer than 1,000 hours per year

Certain union employees

Certain nonresident alien employees


Which Employees Are Excludable?


Plan must be established by the last day of the business’s tax year

IRS-approved plan document– Investment provider– Third-party administrator

How and When to Establish?

Administration may be provided by financial institution or third party

Tracking deferrals Loan administration Distribution and 1099-R reporting Annual IRS Form 5500EZ preparation

– When plan assets are $250,000 or greater


Plan Administration

Pacific Life and its affiliates do not provide any employer-sponsored qualified plan administrative services or impartial investment advice and do not act in a fiduciary capacity for any plan.

Employee salary deferral—any combination– After-tax Roth– Pretax contribution

Employer profit-sharing contribution– Cannot exceed 25% of compensation– Compensation more than $265,000 (2015) is disregarded– Can only be categorized as pretax contributions

Overall limit cannot exceed lesser of 100% of compensation or $53,000 (2015)


Contribution Limits

Elective salary deferral and catch-up contributions can be any combination of pretax contributions or after-tax Roth contributions


Salary Deferral Limits

$18,000 $6,0002015

Catch-Up Contribution for Ages 50+

ElectiveDeferral

Taxable Year

Actual limit may differ due to adjustment for inflation.

Comparison of Annual Contribution Limits


Compensation Maximum ContributionIndividual(k) SEP-IRA SIMPLE IRA

$10,000 $10,000 $2,500 $12,800 $50,000 $30,500 $12,500 $14,000$100,000 $43,000 $25,000 $15,500$150,000 $53,000 $37,500 $17,000$200,000 $53,000 $50,000 $18,500$300,000 $53,000 $53,000 $21,500

Chart assumes business owner is younger than age 50 and therefore cannot make “catch-up” contributions. The maximum contribution limit may be lower for individuals with self-employment income.

Estimated 2015 Allowable Contributions

May or may not be permitted by plan If permitted, maximum outstanding loan amount is

limited to the lesser of:– $50,000 or 50% of vested balance

Five-year (or shorter) amortization Loan payments must be made at least quarterly Interest rates selected by employer


Loans

Distributions

Attainment of normal retirement age

Death Disability

Hardship(salary deferral only)

Termination of plan Separation from service


Some events that “trigger” or permit distribution of retirement plan assets

Distributions prior to age 59½ are subject to an additional 10% federal tax unless a qualifying exception occurs as defined by the IRS

Exceptions include:– Separation from service after age 55– Series of substantially equal lifetime payments– Disability– Death


Early Distribution Federal Tax

This list is not inclusive of all exceptions. Please refer to www.irs.gov for more information.

Individual(k)—Advantages

Contribution limits generally higher than SEP-IRA or SIMPLE IRA

Plan administration costs lower than traditional 401(k)

No discrimination ortop-heavy testing

Roth 401(k) contribution

Availability of loans (funding product restrictions may apply)

Ability to consolidate other retirement assets


Limited employer eligibility Generally restricted to

organizations without employees Plan assets still may not be

protected from creditors


Individual(k)—Disadvantages

Individual(k) Rollover Sources

Qualified plans– 401(k)– Profit sharing– Money purchase– Defined benefit, etc.

403(b)/TSA

Governmental 457(b) Traditional IRA and

rollover IRA SEP-IRA and SIMPLE IRA


Note: A SIMPLE IRA participant can move his or her SIMPLE IRA to another qualified plan after the two-year requirement has been met.


Jack = $150,000 Jill = $50,000

Jack is 52 and Jill is 48

Husband & wife, no employees

Jack & Jill Corporation

Case Study

W-2 wagesThis hypothetical example is for illustrative purposes only.

Case Study


Employee Deferral

Age 50+ Catch-Up

Employer Contribution Total

JackSIMPLE IRA $12,500 $2,500 $4,500 $19,500SEP-IRA $0 $0 $37,500 $37,500Individual(k) $18,000 $6,000 $35,000 $59,000JillSIMPLE IRA $12,500 $0 $1,500 $14,000SEP-IRA $0 $0 $12,500 $12,500Individual(k) $18,000 $0 $12,500 $30,500

2015 Maximum Contribution Limits

Increased overall contribution potential

Lower income-tax liability Social Security benefits

eligibility


Question #1

What are the benefits of paying a spouse and including them in the individual(k) plan?

SEP-IRA is limited to 25% of compensation SEP-IRA does not allow salary deferral

– No 50+ catch-up contribution SEP-IRA does not allow loans SEP-IRA may have to include part-time employees


Question #2

Why might a 45-year-old sole proprietor with high income and no employees choose an individual(k) rather than a SEP-IRA?

Hypothetical example. Product recommendations are to be made based on an individual's specific circumstances and financial goals.

Determined by employer/trustee Many options, including mutual funds and

variable annuities


Question #3

What funding vehicles are available for individual(k) plans?


Meet with employer to determine goals

Identify owner-only businesses (partnerships and sole

proprietorships)

Review book of business

Getting Started

Potential individual(k) candidates include:

Who Are Prime Prospects?

Doctors Attorneys Family farmers Tax advisors Entrepreneurs Independent

insurance agents

Brokers Real estate agents Consultants Moonlighters Accountants Home-business

owners


Higher contribution limits

Access to loans

Cost-effective administration

Funding flexibility

Flexible distribution options

After-tax Roth contributions


Highlights of the Individual(k)

How Can I Help My Clients?


ContactThe Advanced Marketing Group

(800) 722-2333, ext. [email protected]

The Retirement Strategies [email protected]

Additional tools and resources are also available on our website at PacificLife.com.

This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state, or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life, Pacific Funds, their distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor or attorney.


Investors should carefully consider an investment’s risks, charges, limitations, and expenses. This and other information about Pacific Life variable annuities and Pacific Funds are provided in the applicable product and underlying fund prospectuses. These prospectuses should be read carefully before investing.


Annuity withdrawals and other distributions of taxable amounts, including death benefit payouts, will be subject to ordinary income tax.For nonqualified contracts, an additional 3.8% federal tax may apply on net investment income. If withdrawals and other distributions are taken prior to age 59½, an additional 10% federal tax may apply. A withdrawal charge also may apply. Withdrawals will reduce the contract value and the value of the death benefits, and also may reduce the value of any optional benefits.Variable annuities are long-term investments designed for retirement. The value of the variable investment options will fluctuate and, when redeemed, may be worth more or less than the original cost.IRAs and qualified plans—such as 401(k)s and 403(b)s—are already tax-deferred. Therefore, an annuity should be used only to fund an IRA or qualified plan to benefit from the annuity’s features other than tax deferral. These include lifetime income, death benefit options, and the ability to transfer among investment options without sales or withdrawal charges.Effective December 31, 2014, Pacific Life Funds and its family of mutual funds changed its name to Pacific Funds. In addition, individual funds were also renamed. For more information, please visit www.PacificFunds.com.



Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance product and rider guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed by the financial strength and claims-paying ability of the issuing insurance company and do not protect the value of the variable investment options. They are not backed by the broker/dealer from which this annuity is purchased, by the insurance agency from which this annuity is purchased, or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company.

Mutual funds are offered by Pacific Funds. Variable insurance products and mutual funds are distributed by Pacific Select Distributors, Inc. (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company and an affiliate of Pacific Life & Annuity Company (Newport Beach, CA), and are available through licensed third-party broker/dealers.

Pacific Life Insurance CompanyP.O. Box 2378Omaha, NE 68103-2378(800) 722-2333

In New York, Pacific Life & Annuity CompanyP.O. Box 2829Omaha, NE 68103-2829(800) 748-6907

Pacific FundsP.O. Box 9768Providence, RI 02940-9768(800) 722-2333, Option 2www.PacificFunds.comwww.PacificLife.com

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