SecurePlus VIP: A Fixed Indexed Annuity
(FIA) Exclusively for 401(k) Plans
Phase 1 Training
Presented by: Shelby J. Smith, Ph.D.
Training/Service/Support by: 401k Marketing
FOR AGENT USE ONLY
For Agent Use Only
The Market & Why Now?
• The Market*
• Roughly 450,000 401(k) Plans ranging from 1 employees to millions
• 50+ ages own majority of 401(k) assets
• Participating employees: about 50 million
• 401(k) assets: $3.1 trillion (12.2011) – varies with stock/bond market changes
• Why Now?
• Recent market volatility & aging workforce
• Greatest fear of retirees is outliving money**
• Guaranteed lifetime income viewed favorably**
• Potential impact of mandated fee disclosures
• Perceived flaws in current 401(k) plans
*Source: 2012 Investment Company Fact Book, 52nd Edition, Chapter 7
**Source: Allianz Life Insurance Company of North America, Poll released June 2010 & Harris Interactive poll conducted 9/2012 for Wells
Fargo Institutional Retirement & Research
FOR AGENT USE ONLY
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Fixed Indexed Annuity offered by…
• Life Insurance Company of the Southwest
(Rating current as of 12/21/2012)
A.M. Best: A (Excellent)
S&P: A (Strong)
Moody’s: A2 (Good)
• About National Life:
•A Fortune 1000 company serving 840,000 customers
•Founded in 1848
•FIAs since 1996 (first to issue flex FIA)
•LIMRA* recognized: #1 provider of FIAs for employer plans
Source: www.nationallifegroup.com
*LIMRA, U.S. Individual Annuities Executive Summary – Second Quarter 2011
FOR AGENT USE ONLY
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SecurePlus VIP FIA*: Value & Income Plan
• Features & benefits overview:
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Set commissions paid on accumulation value**
No commission on policies to single annuitants for amounts over $1,000,000
Annuitant issue ages 25 – 75 & cumulative max premium $500,000 all ages
Minimum premium: $100/mo. salary reduction & $3,000 Q Single Premium
For 401(k) Plans exclusively:
– 10% free w/d of Accumulated Value for transfer to other plan options after first year***
– Early Withdrawal Penalties: 10 years starting at 10% year 1 and decreasing 1% each year
thereafter. Initial premium date starts penalty period for subsequent premium additions
– Nursing Care at no additional cost: Nursing Care rider not approved in all states
– Portable by employee upon separation from employer – any reason
– Lump-sum and additional premiums permitted subject to minimum amounts
• Integrated Guaranteed Lifetime Income Rider (GLIR”)
*Policy Form No. 8891(0910), along with Rider Form No. 7965, 7966, or state variations thereof. Not approved in all states.
**Single payment of 0.8% in year one at time premium accepted and 0.20% policy quarterly in subsequent years.
***Must maintain at least $2,500 in SecurePlus VIP after withdrawals to keep in force
FOR AGENT USE ONLY
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The FIA* Exclusively for 401(k) Plans
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Integrated Guaranteed** Lifetime Income Rider (“GLIR”) Highlights
• Up to thirty year accumulation period for the Roll-up Rate
• Initial Roll-up Rate guaranteed** for 10 years – current Roll-up Rate is 6%
• Income Calculation Base Adjustment on every fifth anniversary through year 30
• Guaranteed Withdrawal Percentage starting at 3% at age 55*** increasing 0.2% each
year income is deferred up to age 60 & thereafter increases 0.1% annually until age 90.
• Enhanced Withdrawal Benefit that increases the Guaranteed Withdrawal Percentage by
2.5% if the annuitant qualifies & becomes permanently unable to perform 2 of 6 ADLs
(available only in approved states)
• Joint Withdrawal Option is available for male & female spouses at 0.5% lower than
single life and based on age of younger spouse. Enhanced benefits not available for
Joint Withdrawal Option.
• Early withdrawal charges not assessed when GLIR activated
*Policy Form No. 8891(0910), along with Rider Form No. 7965, 7966, or state variations thereof. Not approved in all states.
**Guarantees are dependent on the claims paying ability of the issuing Company
***IRS early distribution penalty may apply before age 59½
FOR AGENT USE ONLY
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The FIA* Exclusively for 401(k) Plans
• Integrated Guaranteed** Lifetime Income Rider (“GLIR”) Highlights
• Withdrawals allowed:
– 10% of accumulation value annually without penalty after year 1***.
– Withdrawals during accumulation period but income Calculation Base will be reduced
proportionally***
– Excess Withdrawals during Withdrawal Period but Guaranteed Withdrawal Payments reduced
proportionally. If withdrawal reduces Accumulation Value to zero, lifetime income stops.
– Stop and restarting income is permitted
– RMD friendly withdrawals are available
• Costs of GLIR
– 0.70% per year for first 20 years & 0.80% per year after year 20
– Each additional premium is tracked separately and the GLIR rider cost based on the elapsed time
since the premium was received & accepted
• SecurePlus VIP is Portable if Annuitant separates from employer
*Policy Form No. 8891(0910), along with Rider Form No. 7965, 7966, or state variations thereof. Not approved in all states.
**Guarantees are dependent on the claims paying ability of the issuing Company
***IRS penalty may apply for withdrawals prior to age 59½
FOR AGENT USE ONLY
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The Solo 401(k) Plan for YOU
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Independent contractors & 1099 employees generally qualify
Cannot have full time employees, except spouse
How is Solo 401(k) funded?
• Rollover other qualified plans into Solo – tax free if done properly
• Annual contributions
– $17,000 in 2012 ($22,500 if age 50 or more)
– 20% to 25% of profits (25% if business pays taxes) up to combined total of $50,000 ($55,500
if > age 50)
– Limit raised to $17,500 ($23,000 for ages >50) for 2013: changes annually with inflation
– Amount could be double if your spouse is on the payroll – one Solo plan with two participants
– If opened by year-end, contributions can be made as late as April 15th of following year
– Both voluntary & profit sharing contributions are discretionary
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Solo 401(k) can be traditional (before tax) or Roth (after tax)
Loan for any use: lesser of 50% of assets’ value or $50,000
Virtually unlimited investment options, including FIAs
ExpertPlan can set up a Solo 401(k) for you
FOR AGENT USE ONLY
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Payment Options for SecurePlus VIP
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Must be insurance licensed & securities licensed/registered to offer
LSW appointment required to offer SecurePlus VIP to 401(k) Plans
SecurePlus VIP cannot be offered outside 401(k) plans
Offering SecurePlus VIP requires approval of BD and/or RIA
If securities licensed (broker dealer):
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Commission of 0.8% paid next commission cycle on all premium received during year 1
After year 1, commission of 0.2% paid on accumulation value at policy quarter’s end
All SecurePlus VIP commissions paid directly by LSW
• If Securities Registered
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Form ADV filed with regulatory authority will state fees
Fees for all assets in the 401(k) plan must be equal percentage amount
Asset fees can different between 401(k) plans, e.g., based on aggregate assets of plan
Maximum fees for SecurePlus VIP FIA cannot exceed 0.8% annually
Fees paid to you by LSW not deducted from participants’ accounts
FOR AGENT USE ONLY
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The “Players” & “Construction” of 401(k)
• The Players
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Product providers: mutual funds, ETF, employer stock, FIA & more
Record keeper
Third Party Administrator (“TPA”)
Custodian
Plan sponsor (employer)
Plan participant (participating employee)
• Construction
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Bundled
Unbundled
Affiliated
FOR AGENT USE ONLY
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Two Record Keeping Options
Only ExpertPlan currently provides electronic FIA record keeping
A 401(k) Plan can have only one record keeper:
• Option #1:
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ExpertPlan will be the record keeper for all Plan assets
Advantage 1: FIA administered same as other options & costs are lower
Advantage 2: Single website for account access/management
Advantage 3: You can become “broker of record” for all Plan assets
Advantage 4: No need to change Third Party Administrator (“TPA”)
Disadvantage: Record keeping must be transferred to ExpertPlan
Option #2:
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ExpertPlan will not be the record keeper & FIA added as brokerage managed account
Advantage 1: Retain current record keeper & TPA
Disadvantage 1: Administrative fees for “managed account” may be higher
Disadvantage 2: FIA cannot be accessed/administered on-line
Disadvantage 3: Broker of record may oppose adding FIA
Disadvantage 4: You may collect fees/commissions only on FIA
FOR AGENT USE ONLY
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What About TPA?
• Record keeper and TPA can be different
• Current TPA & Plan Sponsor must:
• Agree that ExpertPlan will be record keeper OR
• Add FIA to the Plan as a “managed account”
• Note: In “Bundled Design” TPA & record keeper may be affiliated
• If FIA added as “managed account”
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Current TPA will receive paper reports (from LSW) for administration
TPA fees for manual administration may be higher
Paper-based administration means no online functionality
You may or may not be “broker of record” for Plan
Note: If design is “bundled”, adding FIA may be difficult
unless record keeper & TPA changed
FOR AGENT USE ONLY
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What are Your Choices?
• If Plan Sponsor (employer) is willing to change record keeper & TPA
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Discuss circumstances with your marketing representative
ExpertPlan & marketers will help you prepare proposal to present to employer
Highlight benefits of making the change
Establish a date for the changes & work with assigned ExpertPlan marketer
• If Plan Trustee is willing to change record keeper but not TPA
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Confirm the current TPA will work with ExpertPlan
Discussions between TPA and ExpertPlan will occur
Get proposal, present highlights & set dates for changes
• If Plan Trustee is not willing to change record keeper or TPA
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Confirm that current TPA will add FIA as managed account
Highlight benefits of adding FIA to the Plan
• Identifying the product provider, record keeper & TPA
FOR AGENT USE ONLY
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Getting Started with Prospecting
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What about a Solo 401(k) for you (and your spouse if on the payroll)?
Do you have business owner(s) client(s) sponsoring 401(k)?
Do you know decision makers or executives of businesses with 401(k)?
Is record keeper or TPA for prospected plan ExpertPlan or Ascensus?
Size does matter! May want to start with Solo or small plans.
Direct mail program
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Can you sponsor a 401(k) workshop for business owners & self-employed?
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Preapproved prospecting direct letter available from marketer
Customize a letter for use – must be approved by distributor before using
Can 401k Marketing be your “mail house”?
Are you a member of a “business" or “trade” association?
Do you belong to the Chamber of Commerce?
Do you do radio or TV programs?
More prospecting methods covered in Phase 2 Training
FOR AGENT USE ONLY
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Why ExpertPlan?
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ExpertPlan: record keeper for 16,000 plans
Specialty is micro and small plans – your market
Can provide all current mutual funds and ETF in plans to be transferred
In process of merging with Ascensus
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Record keeper for 27,000 defined contribution plans
Administers over 1.5 million IRAs
A division of Crump Group, Inc.: largest U.S. insurance wholesale distributor
Dedicated wholesale staff
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Six internal wholesalers with phone access
Six external (field) wholesalers to assist you from start to finish
As agent/advisor in FIA/401(k) program you will have:
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Advisor site that tracks all your 401(k) Plans
Demonstration sites for plan sponsors & plan participants
Access to internal & external ExpertPlan wholesaler
FOR AGENT USE ONLY
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Why ExpertPlan?
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Your assignment
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Visit www.expertplan.com and review, especially SmartPlan Advisor DEMO
Will need to register as financial partner to obtain proposals – no cost
Visit and review following demonstration sites:
— https://www.expertplan.com/secureplusvip.jsp
user name/password: Secureadvisor/Password1
— or Securesponsor/Password1 for plan sponsor or employee (all are case sensitive)
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LSW private label site for employee, employer & advisor
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What you can offer your 401(k) clients
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Full menu of Mutual funds: stock, bonds & more
Full menu of Exchange Traded Funds (ETF)
Managed account of specialty constructed portfolios
Managed portfolios from your RIA or others
SecurePlus VIP fixed indexed annuity from LSW
ETF versus mutual funds
FOR AGENT USE ONLY
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ExpertPlan Fees
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Plan assets
New Plan Set-Up Fee
Conversion Plan Set-Up Fee
Annual Administration Fee
$0 - $1 million
$750
$1,250
$975
$1 - $4 million
N/A
$1,250
$975
$4 - $8 million
N/A
Waived
Waived
Annual Participant Fee
$39
$29
$19
$375 initial plan set-up fee for Non Standardized plans
$250 annual fee for plans that contain more than 20 investments
$15 annual fee for participant quarterly home mailed statements
$75 one time loan set up – deducted from loan check (no loans available on FIA)
$50 annual loan maintenance – paid by the participant (not applicable to FIA)
$65 per distribution processing and reporting – ExpertPlan deducts these fees from the distribution or participant’s account
$25 Replacement check charge for lost loan and distribution checks.
Client shall enter into a service agreement directly with TD Ameritrade Trust Company to pay for custodial services.
(separate fee schedule)
$250 for post implementation mapping of plan assets
$1,250 de-conversion fee & $150 per hour for customized de-conversion reports
ExpertPlan receives revenue sharing reimbursement on mutual funds, ETFs and FIA
Custom pricing is always considered on a per plan basis
FOR AGENT USE ONLY
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Getting Started with Prospecting
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Define your target market
Develop your marketing strategy
Contact prospects & set an appointment
Cover the list of “advantages” for your involvement:
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No current service, high fees, market exposure
Hands-on service/support/advice & lower cost/fees
Not reducing investment menu, just adding FIA with GLIR
Boost welfare/morale of those approaching retirement & risk averse
Not removing options, just adding lifetime income
Comparison proposal from ExpertPlan is free
FOR AGENT USE ONLY
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What are the Hurdles?
• Longer sales cycle
• Your broker-dealer or RIA must approve FIA
• Must learn 401(k) market & dealing with businesses
• Level commission is only option
• Securities licensed/registered required
• Why follow up service & support is required & critical
FOR AGENT USE ONLY
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What are the Opportunities?
• Working with groups
• Including 401(k) Plans in your practice
• Recurring commission potential
• Potential opportunity for new business outside 401(k)
• Create your own “Solo-401(k)”
• Learn FIA/401(k) market before your competitors
FOR AGENT USE ONLY
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Questions?
Call Help Desk at 401k Marketing at 877.319.2078 for
details. Talk to your marketer: Andy Alvis, Celeste duPreez
or Rebecca Brundage
To do list:
1. Start prospecting for 401(k) plans to add FIA
2. Training session #2: proposal & prospecting process
3. Training session #3: enrollment process
4. Training session #4: follow up & servicing
FOR AGENT USE ONLY
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