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Copyright 2015, The Ohio National Life Insurance Company
Fully Insured Pension Fully Insured Pension Plan for Business Plan for Business OwnersOwners
Maximum Tax Deductions with Guaranteed Retirement Income
Presented by:Nick ChaplainThe Ohio National Life Insurance CompanyOhio National Life Assurance CorporationOhio National Equities, Inc.Member FINRA
2 Copyright 2015, The Ohio National Life Insurance Company
The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation issue a variety of life insurance and annuity products. Product availability varies by state. Guarantees are based upon the claims-paying ability of the issuer.
3 Copyright 2015, The Ohio National Life Insurance Company
Why Business Owners Need Qualified Retirement Plans For maximizing tax benefits For solving liquidity problems that
occur at retirement or death
For sheltering assets from legal liability and creditors
For avoiding taxes on excess accumulated earnings
4 Copyright 2015, The Ohio National Life Insurance Company
Questions To Consider Is your retirement account
underfunded? Do you need to reduce your taxable
income significantly? Would you like to provide substantial
survivor benefits to your beneficiaries? Have stock market declines hurt
your retirement “nest egg”?
5 Copyright 2015, The Ohio National Life Insurance Company
Qualified Retirement Plans Provide retirement, disability and/or
death benefits Must meet specific Internal Revenue
Code requirements Qualify for tax-favored treatment Cannot discriminate
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Qualified Retirement Plans Two main tax advantages for an
employer’s contributions 1. Taxable income is REDUCED by the
amount contributed2. Retirement savings in the owner’s
account grows TAX DEFERRED
7 Copyright 2015, The Ohio National Life Insurance Company
Qualified Retirement PlansTwo Types of Qualified Plans
Defined Contribution Defined Benefit
8 Copyright 2015, The Ohio National Life Insurance Company
Qualified Retirement Plans Defined contribution:
25% of compensation limit for tax-deductible CONTRIBUTIONS
Defined benefit:$210,000 per year maximum
BENEFIT *
*Under current law – dollar amount indexed and may increase each year
9 Copyright 2015, The Ohio National Life Insurance Company
Defined Contribution Plans Retirement benefit
Participant receives account balance at normal retirement date
Annual contributionUsually % of current salary
Limit on each participant’s annual contributionLesser of $53,000* or 100% of salary
*Under current law – dollar amount indexed and may increase each year
10 Copyright 2015, The Ohio National Life Insurance Company
25Age
65Age
$400,000
40 yrs
Contribution = $10,000/yr
55Age
65Age
$100,000
10 yrs
Contribution = $10,000/yr
How Defined Contribution Plans Work
11 Copyright 2015, The Ohio National Life Insurance Company
Defined Benefit Plans Pension benefit
Set by plan formula Annual contribution
Amount needed each year to provide pension at normal retirement date
Limit on each participant’s annual contributionNo dollar limit on annual contribution
12 Copyright 2015, The Ohio National Life Insurance Company
25Age
65Age
$1,000,000
40 yrs
Contribution = $25,000/yr
55Age
65Age
$1,000,000
10 yrs
Contribution = $100,000/yr
How Defined Benefit Plans Work
13 Copyright 2015, The Ohio National Life Insurance Company
How a Fully Insured Pension Plan Works
Business makes tax-deductiblecontributions to the fully
insured pension plan
Fully insured pension plan purchases annuities and insurance policies
Retirement distributionsmade or benefits rolled to
another qualified plan
14 Copyright 2015, The Ohio National Life Insurance Company
How Does a Fully Insured Pension Plan Differ? Plan funding
Whole life insurance and fixed annuities orFixed annuities alone
Guaranteed benefits No market risk
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End Result Larger current tax
deductions Guaranteed
retirement benefits
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What’s the Bottom Line? For each dollar you contribute to the
fully insured pension plan, the government funds 30 to 40 cents of your retirement through the available tax deduction (depending on applicable tax bracket)
17 Copyright 2015, The Ohio National Life Insurance Company
Traditional Defined Benefit Planvs. Fully Insured Defined Benefit Plan
Traditional Plan Fully Insured Plan
Limited early contributions
Larger contributions in early years
May become over/underfunded Always fully funded
Quarterly contribution deadlines
Funding extended to tax filing deadline
18 Copyright 2015, The Ohio National Life Insurance Company
Life Insurance in a Fully Insured Pension Plan Provides estate liquidity Tax-deductible premiums Insures retirement benefit against
premature death
19 Copyright 2015, The Ohio National Life Insurance Company
Life Insurance in a Fully Insured Pension Plan No reduction in the retirement benefit Lower net cost since purchased with pre-tax dollars Increases the contribution and maximizes tax deduction Provides a source of income for loved ones Economic benefit cost reported to the employee annually to preserve tax-free status of death benefit Life insurance can be continued after retirement
20 Copyright 2015, The Ohio National Life Insurance Company
*Without regard to the economic benefit cost and tax deduction**Assumes 40% combined federal and state tax bracket
Life Insurance in a Fully Insured Pension PlanCost Effective Life Insurance Cost of $10,000 Premium
In Retirement Plan = $10,000 Using pre-tax dollars*
Outside Retirement Plan = $16,667 $10,000 premium and $6,667** in income
taxes
21 Copyright 2015, The Ohio National Life Insurance Company
Frequently Asked Questions Do I have to include everyone? Will my contribution level remain
constant? Who can benefit from a fully insured
pension plan?
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Do I Have to Include Everyone? May exclude
Part-time employees Less than 1000 hours per year
Employees less than 21-years oldEmployees with less than one year of
service
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Do I Have to Include Everyone? Vesting
Employee usually must stay a minimum number of years with company to receive full benefits
Vested employee cannot lose benefits, even if the employee leaves the job before retiring
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Will My Contribution Level Remain Constant? Following year’s contributions
reduced byInterest in excess of guaranteed rateDividends
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Will My Contribution Level Remain Constant?
Fully Insured Defined Benefit Pension Plan
Traditional Defined Benefit Plan
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Who Can Benefit From a Fully Insured Pension Plan?Based on three factors
Income
Age
Number of years UNTIL retirement
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Who Can Benefit From a Fully Insured Pension Plan? Business owners who
Are age 50 or older and within 10-15 years of retirement
Have few non-owner employeesDesire to contribute as much as possible
to their retirement on a tax-advantaged basis
Prefer conservative investments over more speculative ones
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Establishing a Plan Established in writing before the end of
the fiscal or calendar year for which a tax deduction is desired
Annual IRS Form 5500 must be filed
TODAY!
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Supercharge Your RetirementFully Insured Pension Plans Are ideal for SELECT businesses Provide large tax deductions Can include a cost effective death
benefit if needed
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Conclusion
For the business owner who would like to maximize tax deductions
and secure guaranteed retirement income, the Fully Insured Defined Benefit Pension
Plan may be the answer!
Fully Insured Defined Fully Insured Defined Benefit Pension PlanBenefit Pension Planfor Business Ownersfor Business Owners
Maximum Tax Deductions with Guaranteed Retirement Income