IMO FOR AGENT USE ONLY Presented By Michael F. Kresl, CPA National Sales Manager

IMO FOR AGENT USE ONLY AMERICAN NATIONAL INSURANCE COMPANY GALVESTON, TEXAS

IMO FOR AGENT USE ONLY

The Small Business Retirement Plan Market EGTRRA….MORE THAN 60 CHANGES LIBERALIZING SMALL BUSINESS PLANS PPA ’06….MADE THE PROVIONS OF EGTRRA PERMANENT CREATED OPPORTUNITES WITH COMBO PLANS AND TRADITIONAL DB AND GAVE THE GREEN LIGHT TO CASH BALANCE PLANS

IMO FOR AGENT USE ONLY OPPORTUNITIES IN THE SMALL BUSINESS PENSION MARKETPLACE EVERY BUSINESS ENTITY CAN HAVE EVERY TYPE OF PLAN THE POSSIBILITIES ARE ENDLESS – WHETHER THEY HAVE A PLAN OR NOT

IMO FOR AGENT USE ONLY WHY SHOULD YOU CONSIDER THE SMALL BUSINESS PENSION MARKET? DOOR OPENER DOOR CLOSER YOU’RE SELLING “TAX DEDUCTIONS” AND “RETIREMENT INCOME” GETS YOU IN FRONT OF THE PEOPLE THAT HAVE THE MONEY

IMO FOR AGENT USE ONLY THE BUSINESS OWNER NEEDS TO UNDERSTAND IT MAY BE COSTING HIM MONEY NOT HAVING A PLAN OR NOT HAVING THE RIGHT PLAN

IMO FOR AGENT USE ONLY WHAT IS A DEFINED BENEFIT PLAN? A PROMISE OF FUTURE BENEFITS NO FLEXIBILITY IN FUNDING

IMO FOR AGENT USE ONLY WHAT IS THE MAXIMUM BENEFIT FROM A DB PLAN? GENERALLY THE PLAN CAN FUND FOR A MAXIMUM BENEFIT OF 100% OF SALARY WITH A DOLLAR LIMIT OF $195,000 (FOR THE YEAR 2011) $16,250 MAXIMUM MONTHLY BENEFIT (WITH 10 YEAR’S PARTICIPATION)

IMO FOR AGENT USE ONLY WHAT IS THE MAXIMUM DEDUCTION ALLOWED TO A DB PLAN? WHATEVER IS NECESSARY TO FUND THE BENEFITS IN THE PLAN THEREFORE, NO MAXIMUM CONTRIBUTION

IMO FOR AGENT USE ONLY WHAT’S THE BIG DEAL WITH 412(e) and DEFINED BENEFIT PLANS? BIG TAX DEDUCTIONS

IMO FOR AGENT USE ONLY 412(e) FULLY INSURED DEFINED BENEFIT PLANS THE LARGEST POSSIBLE DEDUCTION FOR THE BUSINESS OWNER WITH LITTLE TIME LEFT FOR RETIREMENT

IMO FOR AGENT USE ONLY IF GOAL IS MAX DEDUCTION OWNER AGE 52 (Ret age 62) SALARY $195,000 DEDUCTION LIMITS: PROFIT SHARING $ 49, (k) PLAN $ 54,500 DEFINED BENEFIT $ 191, (e) DEFINED BENEFIT $ 274,458

IMO FOR AGENT USE ONLY 412(e)…. IT’S A DEFINED BENEFIT PLAN ALL ASPECTS OF THE PLAN ARE THE SAME AS ANY OTHER DB PLAN –PARTICIPATION –ELIGIBILITY –VESTING –MAXIMUM BENEFIT LIMIT, ETC.

IMO FOR AGENT USE ONLY PLAN FUNDING PLAN INVESTMENTS MUST BE: –IN GUARANTEED INSURANCE COMPANY CONTRACTS –USUALLY… % FIXED ANNUITY, OR 2.COMBINATION OF FIXED ANNUITY AND WHOLE LIFE INSURANCE BENEFITS MUST BE GUARANTEED

IMO FOR AGENT USE ONLY AT RETIREMENT CASH OPTION IS CHOSEN ASSETS ARE ROLLED TO IRA IF ANNUITY DESIRED, THE MARKET CAN BE SHOPPED FOR THE BEST POSSIBLE RATE TO ANNUITIZE INTERGENERATIONAL IRA POSSIBILITIES

IMO FOR AGENT USE ONLY PROSPECTS FOR 412(e) AN OLDER OWNER OF A SMALL BUSINESS (USUALLY AGE 45+) MAKING A LOT OF MONEY WANTS LARGE DEDUCTIONS HAS FEW EMPLOYEES WILLING TO SETTLE FOR “FIXED ASSETS” FOR THE PLAN

IMO FOR AGENT USE ONLY MAXIMUM LIFE INSURANCE SAFE HARBORS 1) FACE AMOUNT OF 100 TIMES THE PROJECTED MONTHLY BENEFIT OR 2) PREMIUM CALCULATED UNDER REV. RUL

IMO FOR AGENT USE ONLY INSURANCE IN A DEFINED BENEFIT PLAN NO INSURANCE IN THE PLAN: INSURANCE ANNUITY TOTAL PREMIUM DEPOSIT PLAN COST -0- $99,394 $99,394 $2,594,436 FACE AMOUNT IN THE PLAN: INSURANCE ANNUITY TOTAL PREMIUM DEPOSIT PLAN COST $66,261 $44,743 $111,004

IMO FOR AGENT USE ONLY INSURANCE IN A DEFINED BENEFIT PLAN CORPORATE SITUATION: NO INS = $99,394 / WITH INS = $111,004 PLAN COST TO ADD INSURANCE = $11,610 AFTER TAX COST (40% BRACKET) = $ 6,966 $66,261 INSURANCE PREMIUM $6,966 AFTER TAX COST 90% DISCOUNT !! TO THE CORPORATION

IMO FOR AGENT USE ONLY INSURANCE IDEA: INSURANCE CAN BE PURCHASED FROM THE PLAN AFTER A FEW YEARS (NO TAXABLE EVENT) AND TRANSFERRED TO AN IRREVOCABLE TRUST TO BE EXCLUDED FROM ESTATE TAXES AT DEATH A COST EFFECTIVE METHOD OF PURCHASING NEEDED INSURANCE Neither American National Insurance Company nor its Representatives gives Legal, Accounting or Tax Advice. Have clients consult their own Tax Advisor

IMO FOR AGENT USE ONLY ADDITIONAL INSURANCE NOTE: LIFE INSURANCE DIVIDENDS MUST BE USED TO REDUCE THE NEXT YEAR’S PLAN CONTRIBUTION INTEREST PAID ON THE ANNUITY IN EXCESS OF THE GUARANTEED RATE MUST BE USED TO REDUCE THE NEXT YEAR’S CONTRIBUTION

IMO FOR AGENT USE ONLY INSURANCE OPTIONS AT RETIREMENT SURRENDER THE POLICY DISTRIBUTE THE POLICY PURCHASE THE POLICY

IMO FOR AGENT USE ONLY CASH BALANCE AGE SALARY ALLOCATION % OF SALARY 55 $225,000 $153,000 70% 44 34,000 5,380 15% 36 30,000 4,750 15% 25 28,000 4,430 15% 22 20,000 3,160 15% $365,000 $170,720 OWNER’S SHARE = 90%

IMO FOR AGENT USE ONLY NEW COMPARABILITY AGE SALARY ALLOCATION % OF SALARY 54 $225,000 $49,000 25% 44 34,000 1,700 5% 36 30,000 1,500 5% 25 28,000 1,400 5% 22 20,000 1,000 5% $337,000 $54,600 OWNER’S SHARE = 89.7%

IMO FOR AGENT USE ONLY SIDE BY SIDE AGE SALARY NEW COMP CASH BALANCE 55 $225,000 $49,000 $153, ,000 1,700 5, ,000 1,500 4, ,000 1,400 4, ,000 1,000 3,160 $337,000 $54,600 $170,720 OWNER’S SHARE = 89.7% 90%

IMO FOR AGENT USE ONLY “TRADITIONAL” PROFIT SHARING AGE SALARY ALLOCATION % OF SALARY 60 $196,000 $29,400 15% 33 46,000 6,900 15% 34 47,000 7,050 15% 54 39,000 5,850 15% 42 35,000 5,250 15% 43 29,000 4,350 15% $392,000 $58,800 OWNER’S SHARE = 50%

IMO FOR AGENT USE ONLY “NEW COMPARABILITY” PROFIT SHARING AGE SALARY ALLOCATION % OF SALARY 60 $196,000 $49,000 25% 33 46,000 2,300 5% 34 47,000 2,350 5% 54 39,000 1,950 5% 42 35,000 1,750 5% 43 29,000 1,450 5% $368,000 $55,200 OWNER’S SHARE = 83%

IMO FOR AGENT USE ONLY SIDE BY SIDE COMPARISON SIDE BY SIDE COMPARISON PLAN 1 PLAN 2 $27,600 15% $49,000 25% 6,900 15% 2,300 5% 7,050 15% 2,350 5% 5,850 15% 1,950 5% 5,250 15% 1,750 5% 4,350 15% 1,450 5% $55,200 $55,200 (50%) (83%)

IMO FOR AGENT USE ONLY WHY IS THIS NOT DISCRIMINATORY? DISCRIMINATION TESTING IS PERFORMED ON PROJECTED BENEFITS, NOT THE CONTRIBUTION LEVELS OF THE PARTICIPANTS

IMO FOR AGENT USE ONLY PLAN ELECTIVE TOTAL AGE SALARY CONTRIBUTION DEFERRAL DEDUCTIONS Owner 50 $211,000 $32,500 $22,000 $54,500 Spouse 50 $ 49,000 $32,500 22,000 $54,500 Total $260,000 $65,000 $44,000 $109,000 Taxable salary for spouse = $ 27,000 Total deductions for spouse = $ 54,500 TOTAL DEDUCTION IS 202% OF TAXABLE SALARY! Note: PS plan contribution of 66.3% of salary (to maximum of $32,500) with $22,000 elective deferral each 401(k) PROFIT SHARING (WITH SPOUSE ON PAYROLL)

IMO FOR AGENT USE ONLY “OWNER ONLY” CORPORATION LOOKING FOR THE LARGEST DEDUCTION! ESTABLISH 412(e) DB PLAN ADD 401(k) PROFIT SHARING PLAN ADD SPOUSE TO PAYROLL FOR $20,500 MAX 412(i) PLAN PROFIT 401 (k) TOTAL AGE SALARY WITH INSURANCE SHARING DEFERRAL DEDUCTION OWNER 55 $245,000 $258,772 $14,700 $22,000 $295,472 SPOUSE 55 $ 22,000 $ 23,709 $ 1,320 $22,000 $ 47,029 $282,481 $16,020 $44,000 $342,501 (Note: this is NRA 65 so could create even larger deductions with a lower NRA) (Spouse’s salary for income tax purposes = 0)

IMO FOR AGENT USE ONLY GET MY #%^&*! ACCOUNTANT ON THE PHONE !!!!!!

IMO FOR AGENT USE ONLY ESTABLISH PROFIT SHARING PLAN AND ROLL IRA FUNDS INTO IT ESTABLISH PROFIT SHARING PLAN AND ROLL IRA FUNDS INTO IT WHY? AVAILABLE FOR LOANS (SP, SUB-S, PARTNERS) PURCHASE OF INSURANCE AGE 55 DISTRIBUTIONS CREDITOR PROOF

IMO FOR AGENT USE ONLY TAKING OVER AN EXISTING PLAN IS VERY POSSIBLE IF YOU CAN SUPPLY 1.MORE FAVORABLE PLAN DESIGN 2.MORE INVESTMENT OPTIONS 3.LOWER ADMINISTRATION FEES 4.PLAN DESIGN, ADMINISTRATION, AND FUNDING ALL IN ONE PLACE

IMO FOR AGENT USE ONLY ANICO ADVANTAGES MORE FAVORABLE PLAN DESIGN LOWER ADMINISTRATIVE FEES MORE INVESTMENT OPTIONS ACTIVE INVESTMENT MANAGEMENT DESIGN, ADMINISTRATION, AND FUNDING ALL DONE IN ONE PLACE

IMO FOR AGENT USE ONLY THAT INCLUDES.. PLAN DESIGN ADMINISTRATION FUNDING INVESTMENT ADVICE ALL IN ONE PLACE

IMO FOR AGENT USE ONLY Roth IRA Sales Idea Small Business Owners can Mitigate the Substantial Personal Income Taxes Due on Roth IRA Conversions! Yes, It’s True... And Somebody’s Not Happy! Here’s how...

IMO FOR AGENT USE ONLY Roth IRA Conversion Tax Consequences Example: Married Taxpayer, $100,000 AGI with taxable income of $80,000 (pre conversion net tax rate of 18%) converts $100,000 to Roth IRA. Prior to Conversion After Conversion AGI $ 100,000 $ 100,000 Taxable Income 80, ,000 Taxes Due (Fed) $ 14,870 $ 41,160 After conversion net tax rate of 23% but an increase in federal income taxes due of $26,290. Add in an additional 5% in state income taxes and the total additional taxes due would approach $ 32,000! __________________ How are the substantial additional taxes to be paid? For Broker/Dealer or Agent Use Only. © 2009 Michael F. Kresl, CPA

IMO FOR AGENT USE ONLY The Concept is Simple... Execute the Roth Conversion... and Contribute to a Qualified Plan... and Mitigate the taxes due on the Roth Conversion by not writing the check to the IRS!... by not writing the check to the IRS!

IMO FOR AGENT USE ONLY Roth IRA – Qualified Plan Tax Planning Strategy Business Owner, Age 50, Compensation: $260,000 No “Eligible” Employees except spouse, $200,000 in NQ “Liquid” Assets Available, 30% Combined Federal & State Tax Rate Objective: Convert $ 200,000 to Roth IRA and NOT PAY the additional $ 60,000 current Federal & State Income Taxes Agenda Contribution 1. Establish Defined Contribution Plan 2. Partial conversion ($100,000) to Roth IRA each year 3. Fund 401(k) $ 100,000 per Year Result: $60,000 saved over 2 years in federal & state taxes. For Broker/Dealer or Agent Use Only. © 2009 Michael F. Kresl.

IMO FOR AGENT USE ONLY PLAN ELECTIVE TOTAL AGE SALARY CONTRIBUTION DEFERRAL DEDUCTIONS Owner 50 $211,000 $32,500 $22,000 $54,500 Spouse 50 $ 49,000 $32,500 22,000 $54,500 Total $260,000 $65,000 $44,000 $109,000 Taxable salary for spouse = $ 27,000 Total deductions for spouse = $ 54,500 Note: PS plan contribution of 66.3% of salary (to maximum of $32,500) with $22,000 elective deferral each For Broker/Dealer or Agent Use Only. 401(k) Profit Sharing Plan (With Spouse on the Payroll)