A Connection That Builds

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T R A N S A M E R I C A,
T H E I R S, Y O U

• A Connection That Builds

Y O U R B U S I N E S S
Monday, July 16, 2001
For Producer Use Only. Not For Public
Distribution.
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Why the Connection Is Important To You

• Expanded Opportunities for New Business
• Target Money Purchase Plans to Convert
• Lower Costs and Tax Credits for Small Businesses
• Simplified Rules for New Plans
• New Rules Will Stimulate Demand
• Increases Plan Assets in the Door
• Higher Contribution Limits
• Higher Deduction Limit for Plan Sponsors

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Our Discussion Agenda

• New Contribution Limits Benefit All Investors
  (Using Case Studies)
• Increased Deduction Limits Benefit Plan Sponsors
• Take Advantage of the Connection
• How Transamerica is Helping You

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New Contribution Limits Benefit All
InvestorsEveryone Can Save More
ii iii iv iv v vi vii viii

• 
  
  Current Effective
  Effective
• Maximum Limits for Defined Contribution Plans
  IRAs Law 2002
  2003
• Maximum Combined Employer/ Employee
  Contributions
  35,000 i 40,000
• Maximum Compensation 170,000 200,000
• Employee Contribution Limits
• 401(k) and 403(b) Plans 10,500 11,000
  12,000
• Catch-Up Limits for 401(k) and 403(b) Plans Age
  50 only N/A 1,000 2,000
• SIMPLE 401(k) Plans / SIMPLE IRAs 6,500 7,000
  8,000
• Catch-Up Limits for SIMPLE 401(k) Plans Age 50
  only N/A 500 1,000
• IRA 2,000 3,000 3,000
• Catch-Up Limits for IRAs Age 50
  only N/A 500 500
• (i) Lesser of 35,000 or 25 of employee
  compensation. (ii) Lesser of 40,000 or 100 of
  employee compensation with Cost of Living
  Adjustment (COLA) increase in 1,000 increments
  after 2002. (iii) COLA increase in 5,000
  increments after 2002. (iv) Increasing by 1,000
  each year in 2004-6 thereafter, COLA increase in
  500 increments. (v) Increasing by 1,000 each
  year in 2004-5 thereafter, COLA increase in 500
  increments. (vi) Increasing by 500 each year in
  2004-6 thereafter, COLA increases in 500
  increments. (vii) Annual limit remains at 3,000
  in 2004 increases to 4,000 in 2005-7 5,000 in
  2008 thereafter, COLA increase in 500
  increments. (viii) Annual IRA limit continues to
  increase by 500 in 2004-5 increases by 1,000
  in 2006 and thereafter. No COLA increase provided.

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New Limits Benefit InvestorsHCEs Can Save More

• Founder and CEO of X-Croft, a 6-person Web-based
  services firm
• 250,000 Annual Gross Income
• Age 55
• Plan limits deferrals to 5 for HCEs
• Objective Maximize her retirement contribution

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New Limits Benefit InvestorsHCEs Can Save More

• Geena Monroe, CEO

Post EGTRRA
2001
2002 Maximum
Compensation 170,000 200,000 401(k)
Contribution 5 8,500 5 10,000 NCP
Contribution 26,500 30,000 Catch-Up
Contribution 0 1,000 Total Retirement
Savings 35,000 41,000
and
for youMORE assets in the door
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New Limits Tax Credit Benefit Low to Middle
Income Investors

• Employee, Burger World
• Age 21
• Filing head of household
• 15 tax bracket
• 50 tax credit rate
• Employer Match 50 of 1st 6

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New Limits Tax Credit Benefit InvestorsNHCEs
Can Save More

Post EGTRRA
2001
2002 Gross
Income 18,000 18,000 (401(k) Contribution)
2 (360) 6
(1,080) Employer Match 180 540 Gross Income on
W-2 17,640 16,920 Federal Income Tax
(2,646)
(2,038) Bottom Line Tax Credit
0
540 Impact on Federal Income Tax After Tax
Credit 2,646 1,498 401(k) Savings 540 1,620
Deduction is applied after FICA and all other
applicable taxes are taken from Gross Income.
Does not reflect amount of 2001 tax rebate
check.
and for youMORE
assets in the door

• Rick Howell

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Income Tax CreditFor Low and Middle Income Savers

• Available to individuals with joint/single AGIs
  beginning at 30,000/15,000
• Phases out for individuals with joint AGIs of
  50,000
• Phases out for individuals with single AGIs of
  25,000
• Must be 18 or older (not a dependent or full-time
  student)
• The maximum contribution eligible for the tax
  credit is 2,000
• Tax Credit ranges from 50 to 10 of employee
  contributions
• Expires 1/1/2007

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New Limits Benefit InvestorsUnpaid Spouse Can
Now Save

• Andrea Martin, spouse of small family business
  owner, currently does not take salary
• Husband takes salary
• CPA Recommendation Andrea not take salary
• Safe Harbor 401(k) Plan 3 nonelective
  contribution

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New Limits Benefit InvestorsUnpaid Spouse Can
Now Save

Post EGTRRA
2001
2002 Gross
Income 0 14,000 (401(k) Contribution)
0
(11,000) Safe Harbor Contribution 3
420 401(k) Savings 0 11,420 The 14,000
paid to Andrea will be subject to FICA at the
employee and employer tax rate of 15.3.

and for youMORE assets in the door

• Andrea Martin

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Increased Profit-Sharing Deduction Limit All
Businesses Can Save More

• New profit-sharing deduction limit is 25, up
  from 15 last year
• Permits total payroll, including 401(k) deferrals
• The 401(k) deferrals are not treated as (or not
  deemed to be) employer contributions, so they
  are not subject to the employer deduction limit

Post EGTRRA
2001
2002 Company Eligible
Payroll 1,000,000 1,000,000 (401(k) Employee
Deferrals) (100,000) (N/A) Adjusted
Eligible Payroll 900,000 1,000,000 Deduction
Limit x 15 x 25 Employer Deductible
Amount 135,000 250,000
and for
younew business opportunities
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Increased Deduction Limits Benefit Plan Sponsors
Make Money with Money Purchase Conversions

• Money Purchase Plans no longer offers advantage
• Great Conversion Opportunity
• Profit-Sharing Plans
• New Comparability Plans
• Takeover assets from money purchase plan
  conversions to profit-sharing plans
• Prospect lists from Transamerica
• and for younew biz and
  MORE assets in the door

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New Comp is a Great DealBest Approach for New
Business

• Higher contribution limits for select group
• Currently 35,000, up from 30,000 last year
• 40,000 in 2002
• Pass IRS non-discrimination tests

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New Portability Is A Big WinFor Individuals,
Sponsors, and You

• Individual rollovers permitted between employer
  401(a), 403(b), governmental 457 plans, and IRAs
• Tax-exempt employer 457 plans are excluded
• Applied to distributions after 12/31/2001

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EGTRRA Fosters Small Business SalesSimplification
of Top Heavy Rules

• Key Employeedefinition is simplified
• Safe Harbor 401(k) Plansare now exempt from
  top-heavy testing
• Minimum Contribution Requirementcan now be
  satisfied with matching contributions
• Look-Back Rule Reducedsimplify data gathering
  for employers and simplify administration for
  recordkeepers

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EGTRRA and IRS Foster Small Business Sales

• Congress Helps Small Businesses
• Tax Credit For Plan Start-up Costs
• 50 of the first 1,000 in administration and
  retirement education expenses for each of the
  first three years
• Employers with not more than 100 employees
• All employees must earn in excess of 5,000 in
  prior year
• At least one NHCE is covered under the plan

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EGTRRA and IRS Foster Small Business Sales

• IRS Helps Small Businesses
• IRS User Fee Waived
• New plans established by sponsors with 100 or
  less employees
• At least one NHCE must be covered under the plan
• IRS filing submitted after 12/31/2001 and within
  the first 5 plan years

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How Transamerica is Helping YouOngoing EGTRRA
Education and Sales Ideas

• Action Plans to Build Your Business
• Updates on IRS Rulings
• EGTRRA Prospecting Letter on Web Site
• CE Seminars
• Client Seminars
• Special Sales Opportunity Edition of The Book
• EGTRRA focus
• Available 3rd Quarter
• EGTRRA Communications Via
• www.ta-retirement.com
• Worth a Look
• Blast fax
• E-mail

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How Transamerica is Helping ClientsOngoing
EGTRRA Education Action Plans

• EGTRRA Model Amendments mailed in the 4th quarter
• Communicating EGTRRA Advantages
• Worth a Look, InformedSponsor, Web site, Direct
  Mail, Telephone, Client Visits, Enrollment
  Meetings, and Enrollment Materials
• Building Participant and Employee Awareness
• Worth a Look, InformedParticipant, Web site,
  Posters
• Targeted Action Plans

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Make the Most of the Connection

• Build New Business
• Legislation Makes it Easier for Small Companies
  to Adopt New Plans
• Target Money Purchase Plans for Conversion to
  Profit- Sharing Plans
• Increase Your Asset Base
• Higher Compensation, Contribution, and Deduction
  Limits
• Catch-Up Provision Helps Employees Save More
  (Catch-up deferrals are not included in
  discrimination testing)
• Opportunity for Rollover Consolidations

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Any Questions? Call [phone]

• Transamerica Retirement Services is your expert
  resource for
• Plan design consulting
• Customized retirement solutions
• New Comparability plans
• Sales support
• EGTRRA sales strategies