the ubs small business pension program year-end training event, november 1, 2005 presented by: emjay...

The UBS Small Business Pension Program

Year-End Training Event, November 1, 2005

Presented By: EMJAY Retirement Plan Services

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Neither EMJAY Retirement Plan Services nor UBS Financial Services Inc. provide legal or tax advice.

Clients should be advised to consult with their legal and tax professionals before choosing to participate

in the Small Business Pension Program.

EMJAY Retirement Plan Services and UBS Financial Services Inc. are not affiliated.

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Today’s Agenda

Overview of Small Business Retirement Plans What is the Small Business Pension Program? Client Benefits Client Suitability Next Steps

Overview of Retirement Plans Available to Small Businesses

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What Choices Do Small Business Owners Have?

SEP IRA SIMPLE IRA Profit Sharing 401(k) Defined Benefit

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What Plan Can Work if Business Has No Employees?

401(k) (Owner-Only)

SEP IRA

Defined Benefit

Wants annual contributions up to lesser of 25% or $42,000*

Wants slightly larger contribution of 25% plus

$14,000*, up to $42,000* plus $4,000* extra for ages 50+

Wants to contribute more than $42,000* and willing to commit to annual contributions

*2005 limits

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What Plan Can Work if Business Has Employees?

SIMPLE IRA or401(k) (Safe Harbor)

SEP IRA or

Profit Sharing

Defined Benefit

Wants to make annual employer contributions up to lesser of 25% or $42,000*

Wants employee salary deferrals with limited employer

required contribution

Older owner (age 45+) wants maximum contribution and has few employees (1-4)

Vesting, part timer exclusion and loans available in profit sharing

*2005 limits

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For Whom Are These Plans Suitable?

SEP IRA

Profit Sharing

Defined Benefit

All employer funded plans

May be suitable if employer is willing to make all plan contributions

SIMPLE IRA

401(k)

Employee and employer funded plans

May be suitable if employer wants employees to share in funding retirement plan by making salary deferral contributions

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$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Assumptions: 52 year old earning $400,000 annually, contributing until age 62. 5.5% investment return.

Maximum Annual Contribution in 2005

AccumulationAfter 10 Years

$42,000 $42,000 $46,000 $24,000 $160,000

SEP IRA

ProfitSharin

g

401(k)

SIMPLE IRA

Defined

Benefit

Maximum Annual Contributions and Retirement Accumulations – One Person Plan

This hypothetical example is provided for illustrative purposes only and is not intended to represent a specific investment or portfolio.

What is the Small Business Pension Program?

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What is the Small Business Pension Program?

A simplified and streamlined turn-key defined benefit plan program

Designed for businesses of one to five employees

Created specifically to take advantage of recent changes in the tax code

May allow a small business owner to make some of the highest tax-deductible retirement contributions allowed by law


How Much Can Be Contributed to a Small Business Pension Program?

Generally more than the contribution limit for defined contribution plans (i.e. $42,000 in 2005) when the business owner is older

Typical annual contributions to a Small Business Pension Program are in the $100,000 to $200,000 range


How Do Defined Benefit Plans Work?

The benefit at retirement is equivalent for each employee, based on a percentage of compensation

Age and income affect how much can be contributed to the plan

By contrast, in most defined contribution plans, only income affects the contribution, not age

Each client’s contribution is different based on age and income

Age 65Age 55Age 25

10 years40 years


How are Contributions Determined?

Plan can fund for a maximum retirement benefit of 100% of compensation up to $170,000 per year (2005 limit)

Actuary calculates total assets needed to provide retirement benefit (maximum of $2,060,835 at age 62)

Actuary then calculates annual contribution needed to provide those assets at retirement

Because older employees are closer to retirement, contributions on behalf of those employees must be greater to provide for the retirement benefit


How Are Assets Invested?

All investments are held in a UBS branch account Plan assets are pooled for all participants Investments are directed by plan’s trustee – usually

the business owner Employer bears all investment risk and fiduciary

responsibility Flexible array of stock, bonds, mutual funds, managed

account programs, etc. Since the program’s actuary assume an investment

return of 5.5% per year, investments should be selected to target this rate of return Returns exceeding 5.5% will decrease required contributions

in future years Returns less than 5.5% will increase required contributions in

future years

How Can Your Clients Benefit?


What are the Benefits to the Client?

Contributions and investment earnings are tax-deferred

The annual tax savings in a Small Business Pension Program are typically in the $40,000 to $80,000 range

Client can roll over assets into an IRA upon retirement or plan termination – otherwise they are taxable as ordinary income when distributed

Client Suitability


What Type of Business Owner Might Be Interested?

Doctors Dentists Lawyers Consultants Entrepreneurs Real estate professionals Self employed spouses of high-income

earners Board members CPAs


Who is Eligible?

Sole-proprietors Corporations S-corps Partnerships Business types with issues:

Controlled groups Owner paid both W-2 income and divided

distributions

Call EMJAY at (866) 269-2573 for help in determining whether a business is eligible


For Whom is this Suitable?

Business owners who are 45 years old or older

Have five or fewer employees Earn $100,000 or more per year Willing to make an annual commitment

to the plan


ConsiderationsHow Does The Required Commitment Work?

IRS expects plan to be permanent Client has to contribute for a fixed

number of years – generally at least three to five years

Earlier terminations are subject to IRS rules and penalties on plan excesses and shortfalls and potential disqualification by the IRS

Client needs good annual cash flow and stable income stream


What if a Client Does Not Want to Make the Commitment?

Consider a SEP IRA, Profit Sharing or Owner-Only 401(k)

No required contribution Lower contribution limit ($42,000 plus

possible $4,000 catch-up for ages 50+ in 2005)

Same investment flexibility EMJAY also offers plan administration

services for Owner-Only 401(k) plans


Sample Clients

Occupation: Doctor Age: 55 Employees: 0 Compensation: $300,000 Contribution: $174,501 Tax Savings: $69,801 (40% tax bracket)

Retirement Benefit: $1,442,585

This hypothetical illustration is provided for illustrative purposes and is not intended to represent a specific investment or portfolio. Retirement benefit is based on a 5.5% actuarial return assumption.


Sample Clients

Occupation: Lawyer Age: 50 Employees: 2

Age 30, $41,500

Age 35, $42,500

Compensation: $250,000 Contribution: $137,767 (91% for her)

Tax Savings: $50,308 (40% tax bracket)

Retirement Benefit: >$2,000,000This hypothetical illustration is provided for illustrative purposes and is not intended to represent a specific investment or portfolio. Retirement benefit is based on a 5.5% actuarial return assumption.


What Do You Do Next?

Plans must be established with plan documents completed and signed by business’s year-end (12/31 for calendar year businesses)

Go through your current book of business and look for small business owners who: are 45 years old or older; have five or fewer employees; earn $100,000 or more per year; and are willing to make fixed annual contributions for three to

five years


What Do You Do Next?

Visit the website: www.smallbizpension.com

Use available marketing materials: Client Brochure Prospecting Letters Newsletters for prospecting ideas

Select “Run a Client Proposal” link at top right of the page

Present the proposal

http://www.smallbizpension.com/


Creating a Client Proposal


How Do You Close the Sale?

When you run a proposal, an EMJAY consultant will call you in a day or two.

Under no circumstances will EMJAY call your client directly.

Once you have a client who is interested, call an EMJAY specialist at (866) 269-2573 for a conference call with your client.

Submit the Set-Up Questionnaire along with the set-up fee.

Open the UBS investment account. Contact UBS Retirement Consulting Services at

1-888-738-1546, option 1 for general information on all small business retirement plans


What Does EMJAY Do?

EMJAY is the program’s third party plan administration firm providing: Actuarial work Government filings Client service

EMJAY plan administration fees: Set Up: $1,200 plus $50 per participant Annual: $1,500 plus $100 per participant

Thank You

Questions?

the ubs small business pension program year-end training event, november 1, 2005 presented by: emjay...

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