For producer use only. Not for presentation to the public.OLA 1290 0209

Is There Still Life in These Plans?

2 For producer use only. Not for presentation to the public.

This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.

3 For producer use only. Not for presentation to the public.

Why 412(e)(3) Now?

Uncertain economic climate

Clients leery of investing solely in stocks or bonds

Desire for guaranteed retirement income

Favorable Pension Reform: EGTRRA 2001

compensation/contribution limit changes

no plan aggregation

no family aggregation

4 For producer use only. Not for presentation to the public.

2005 2006 2007 2008 2009CompensationIRC 401(a)(17)

$210,000 $220,000 $225,000 $230,000 $245,000

Annual Benefit IRC 415

100% of pay not to exceed $170,000. Reduced if benefit starts before age 62.

100% of pay not to exceed $175,000. Reduced if benefit starts before age 62.

100% of pay not to exceed $180,000. Reduced if benefit starts before age 62.

100% of pay not to exceed $185,000. Reduced if benefit starts before age 62.

100% of pay not to exceed $195,000. Reduced if benefit starts before age 62.

EGTRRA Increases Compensationand Benefit Limitations

5 For producer use only. Not for presentation to the public.

What Is a Section 412(e)(3) Plan?

Defined benefit qualified retirement plan

Funded exclusively with guaranteed insurance products

Level annual funding is required

Plan benefits equal contract benefits

Exempt from usual defined benefit plan minimum funding requirements

Contributions based on present value of future benefits

6 For producer use only. Not for presentation to the public.

Investment Options

Annuity-only option

Annuity and life insurance option

Contract selection does not change benefit

Life insurance adds family security

7 For producer use only. Not for presentation to the public.

Benefits of a 412(e)(3) Plan

Maximize contributions and deductions

Limit complexities of traditional defined benefit plans

Minimize market risk

Benefits can increase over time—which can help offset effects of inflation

8 For producer use only. Not for presentation to the public.

Traditional Plan 412(e)(3) Plan

Limited early contributions Larger upfront contributions

May become over-/underfunded Always fully funded

Quarterly contribution deadlines Funding extended to tax filing deadline

Traditional Defined Benefit vs. 412(e)(3) Fully Insured Plan

9 For producer use only. Not for presentation to the public.

Traditional Defined Benefit

412(e)(3) Plan

Cash at Age 65 $2,206, 088 $3,796,729

Interest Assumption 5% 3%

Actuarial Mortality Current Guaranteed

Normal Retirement Age Reasonable Reasonable

Calculations provided by The Heritage Group, LLC. Assumes plan participant is 50 years old. Funding for maximum retirement benefit allowed at age 65.Participant’s compensation in all years is in excess of $245,000.

Defined Benefit Plan vs.412(e)(3) Plan Comparisons

10 For producer use only. Not for presentation to the public.

GATT vs. Lump Sum Monitoring

Limits imposed by Congress

Look at current IRS interest rates to determine presentvalue of annuity

Interest rates change annually

412(e)(3) vs. traditional defined benefit plan—reach GATT limit earlier

Choice to annuitize 412(e)(3) or roll over lump sum depends on a variety of planning factors

11 For producer use only. Not for presentation to the public.

Guaranteed Returns—Why Bother?

“Why should someone consider a guaranteedlife insurance policy and annuity vehicle for retirement?”

For Clients

Larger upfront tax deductions with guaranteed benefits

For Advisors

Possible opportunity for long-term money management

12 For producer use only. Not for presentation to the public.

Transamerica’s Approach to a 412(e)(3) Plan Offers Planning Flexibility Life insurance is no longer needed

Life insurance is needed

receive policy as plan distribution

roll life insurance policy into profit-sharing plan

purchase life insurance policy from profit-sharing plan

Change the policy to meet new objectives

buy spousal protection for estate planning

keep individual insurance protection

13 For producer use only. Not for presentation to the public.

TransFreedom® II (Form AF715 101 186 104) is a flexible premium deferred fixed annuity issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499. Contract form and number may vary, and this contract may not be available in all jurisdictions.

Life Insurance ProtectionNo Longer Needed

Plan Participant Retires or Separates from Service

14 For producer use only. Not for presentation to the public.

When Life Insurance Is Needed

Plan participant Retires or Separates from Service—Receives the Policy as a Plan Distribution

Policy transferred as plan distribution

Income tax paid on fair market value of policy less taxable economic benefit

15 For producer use only. Not for presentation to the public.

When Life Insurance Is Needed (Cont’d)

Plan Participant Retires or Separates from Service—Roll the Life Insurance Policy to a Profit-Sharing Plan (PSP)

Policy transferred directly to PSP

Not a taxable distribution

16 For producer use only. Not for presentation to the public.

When Life Insurance Is Needed (Cont’d)

Plan Participant Retires or Separates from Service— Purchases the Policy from the Profit-Sharing Plan

® ® ®

17 For producer use only. Not for presentation to the public.

TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond

Current company practice

ISWL policy can be surrendered

cash surrender value rolls into profit-sharing plan or IRA

For same net amount at risk, Transamerica may issue new second-to-die universal life policy

No evidence of insurability required on former plan participant

18 For producer use only. Not for presentation to the public.

TransSecure® II (Policy Form #1-18011108, #ICC08-180) and Transecure® II NY (Policy Form #3-18038108) are nonparticipating, limited payment, fixed premium, interest-sensitive, whole life insurance policies issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499 or Transamerica Financial Life Insurance Company, Purchase, NY 10577. Policy forms and numbers may vary, and these policies may not be available in all jurisdictions. In most states, in the event of suicide during the first two policy years, death benefits are limited only to the return of premiums paid. In Missouri, suicide is no defense to payment of benefits unless the Company can show that the insured intended suicide at the time of application for coverage.

TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond (Cont’d)

Evidence required on spouse’s life

Owner can be irrevocable trust so death benefit avoids estate inclusion

Cost of insurance based on insured’s current age—subject to new surrender charges

New compensation

Offered by company practice

19 For producer use only. Not for presentation to the public.

TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond (Cont’d)

Buying Spousal Protection for Estate Planning

20 For producer use only. Not for presentation to the public.

TransSecure® II and TransSecure® II NY — Flexible for 412(e)(3) and Beyond (Cont’d)

Single Life (offered by company practice)

Available when policy is no longer part of 412(e)(3) plan and is surrendered

Available beginning the 8th policy year

Insured’s age and surrender charge period remain unchanged

May roll cash surrender value into profit-sharing plan or IRA

New premium must be paid to prevent policy lapse

New death benefit will be net amount at risk

21 For producer use only. Not for presentation to the public.

The Role of a Third-Party Administrator

Develops suitable 412(e)(3) plan proposal

Assists in preparation of plan documents

Annual administration

calculates plan contributions

performs incidental benefits testing

prepares required reports

handles distributions

22 For producer use only. Not for presentation to the public.

Planning Considerations

There is a huge tax bill accruing on the backside of the 412(e)(3) plan—all we’re doing is deferring taxes

23 For producer use only. Not for presentation to the public.

Planning Considerations (Cont’d)

What makes Transamerica’s approach to Section 412(e)(3) plans safer than those offered by the competition now that the IRS issued regulations that will change the valuation of life insurance policies?

24 For producer use only. Not for presentation to the public.

IRS Guidance on Valuationof Life Insurance Valuation

Notice 2005-25

Modifies and supersedes 2004-16

Provides guidance on fair market value oflife insurance policies

Provides safe harbor formula

25 For producer use only. Not for presentation to the public.

Who Might Benefit from a412(e)(3) Plan? The best candidates for a 412(e)(3) plan might be:

Highly paid business owners and professionals:

looking to maximize tax deductions

who can make a multiple-year commitment; and/or

who prefer security and guarantees over a fluctuating stock market

Smaller, closely held businesses

Companies with few or no common law employees

S corporation owners with W-2 salary

Independent contractors

Companies with larger employee groups wishing to create definedbenefit “carve-out” plans

26 For producer use only. Not for presentation to the public.

412(e)(3) Summary

Enhanced retirement benefits

Enhanced contributions/deductions

Enhanced security

27 For producer use only. Not for presentation to the public.

Professional Advice

Professional advice is critical

Tax, ERISA, and legal counsel

Risk/benefit analysis

Financial projections

Careful drafting

28 For producer use only. Not for presentation to the public.

Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give ERISA, tax, or legal advice. This presentation is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here.

Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not take into consideration the general tax and ERISA provisions applicable to defined benefit retirement plans or the impact of applicable state laws on clients and prospects.

Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and liability with respect to it. This information is current as of February 2009.

For producer use only. Not for presentation to the public.OLA 1290 0209

Is There Still Life in These Plans?