Retirement Plan Solutions
for High Net Worth Business
Owners
FIRST LAST NAME
PRESENTERS TITLE
MONTH/DATE/YEAR
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured
by the FDIC or any other agency and involve investment risks, including the possible loss of the principal amount invested.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.
225 Liberty Street, New York, NY 10281-1008
© 2015 OppenheimerFunds Distributor, Inc. All rights reserved.
Retirement Solutions
State of the Market:
Trends to
Capitalize on
Cross-Tested Plans:
New Comparability
Defined Benefit Plans:
Super Comp
2
Traditional
Cash Balance
Common Reasons Small Businesses Hesitate to
Establish a Plan
 Reluctance to make required employer contributions
 Employee turnover: Lack of vesting schedules cause too
much money to go to short-term employees
 Costs too much to set up and administer
 Too many government regulations/too much paperwork
 Benefits to owner are too small
3
How to Address these Concerns
 Think beyond the 401(k)
 Find the right plan design to meet your company’s specific needs
 The right plan design can benefit you, your business and your
employees
4
Providing Solutions
5
Reluctance to make
required contributions
 Flexible contributions
Employee turnover
 Exclude employees
where possible
Costs too much to set up
and administer
 Low cost relative to
contributions, plus
incentives for small
businesses
Too many government
regulations
 Government regulations
work for—not against—
the business owner
Benefits to owner are too
small
 Maximize contributions
for owner(s)
Retirement Solutions
New Comparability
Profit Sharing
Super Comp
Defined Benefit Plans:
Traditional
Cash Balance
6
NEW COMPARABILITY PLANS
7
New Comparability
 Takes cross-testing a step further
 Uses specific employee classifications—rather than strictly age—to
design contribution levels for participants
 Participants are divided into two or more classes
 Classes may be based on any reasonable criteria: ownership, job
tenure, age
8
Compelling Story
 Larger contributions are made for one class than for another
 Usually substantial contributions are made for the favored group, with
lower contributions for the other employees
9
All Eligible
Employees
How They Work
10
Divide
into
Classes
Class #1:
Larger
Contributions
Class #2:
Smaller
Contributions
Analysis and
proof that
projected
benefits at
retirement age
are “comparable”
Two Key Factors
1.Equivalent Benefit Accrual Rates (EBARs)
2.Comparability of benefits
 Use cross-testing to
 Compare apples and oranges
 Turn apples (contribution allocations) into oranges (EBARs)
 Make sure both classes of employees get a comparable number of oranges
 Complex!
11
Converting Allocation Apples into EBAR Oranges
 Each participant’s allocation is accumulated with interest to retirement
age
 The accumulated amount is then divided by an annuity rate to produce
an equivalent monthly retirement benefit
 That amount is then annualized and divided by the participant’s
annual compensation to arrive at the participant’s annual Equivalent
Benefit Accrual Rate (EBAR)
12
How About Them Apples?
 Amount of contribution allocation is now all about EBARs
 Instead, EBAR oranges are compared to determine if plan is
discriminatory
13
IRS Regulations for New Comparability Plans
Age-weighted and service-based cross-tested plans OK
 Minimum gateways for non-highly compensated employees (NHCEs)
and/or relative contribution rates for highly compensated employees
(HCEs) and NHCEs
 The lowest NHCE contribution rate must be at least:
 1/3 of the highest HCE contribution rate, or 5% of compensation
 Complex alternative allocation methods
14
Considerations?
 Higher administration costs, but...
 Balance higher cost with value of larger contributions
 Tax deductible employer contributions
 Tax credits may be available to offset start-up costs
15
May Work Best for:
Owners and principals who:
 Are older than other employees (Wide age spreads are ideal)
 Want the contribution flexibility of profit-sharing plan
 Want the biggest possible share of the plan contributions allocated to
their own accounts
16
MAKING IT WORK: A CASE STUDY
17
Thriving Professional Practice
Age
Salary
Doctor 1
54
$265,000
Doctor 2
45
$265,000
Nurse 1
41
$50,000
Nurse 2
30
$35,500
Assistant 1
47
$29,000
Assistant 2
27
$23,000
Assistant 3
24
$23,000
Receptionist
25
$22,000
Owners:
Staff:
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
18
Owners’ Goals
 Maximize retirement benefits for the two owners
 Minimize required contributions for staff
 Maintain contribution flexibility
19
Traditional Profit-Sharing Solution
Age
Salary
20% Profit
Sharing
Doctor 1
54
$265,000
$53,000
Doctor 2
45
$265,000
$53,000
$530,000
$106,000
Total
Nurse 1
41
$50,000
$10,000
Nurse 2
30
$35,500
$7,100
Assistant 1
47
$29,000
$5,800
Assistant 2
27
$23,000
$4,600
Assistant 3
24
$23,000
$4,600
Receptionist
25
$22,000
$4,400
Total
$182,500
$36,500
Grand Total
$712,500
$142,500
74% of total
20% of income
26% of total
20% of income
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Hypothetical reflects 2015 limitations. Contribution calculations provided by Verisight,Inc.
Verisight,Inc. is not affiliated with Oppenheimer Funds Distributor Inc.
20
What About Social Security Integration?
Contribution
Age
Salary
20% Profit
Sharing
Doctor 1
54
$265,000
$53,000
$53,000
Doctor 2
45
$265,000
$53,000
$53,000
$530,000
$106,000
$106,000
Total
Integrated
Nurse 1
41
$50,000
$10,000
$8,424
Nurse 2
30
$35,500
$7,100
$5,981
Assistant 1
47
$29,000
$5,800
$4,886
Assistant 2
27
$23,000
$4,600
$3,875
Assistant 3
24
$23,000
$4,600
$3,875
Receptionist
25
$22,000
$4,400
$3,707
Total
$182,500
$36,500
$30,748
Grand Total
$712,500
$142,500
$136,748
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Hypothetical reflects 2015 limitations. Contribution calculations provided by Verisight,Inc.
Verisight,Inc. is not affiliated with Oppenheimer Funds Distributor Inc.
21
$106,000
77% of total
20% of income
$30,748
23% of total
17% of income
Age-Weighted Solution
Contribution
Age
Salary
20% Profit
Sharing
Doctor 1
54
$265,000
$53,000
$53,000
$53,000
Doctor 2
45
$265,000
$53,000
$53,000
$24,445
$530,000
$106,000
$106,000
$77,445
Total
Integrated
Age
Weighted
Nurse 1
41
$50,000
$10,000
$8,424
$3,576
Nurse 2
30
$35,500
$7,100
$5,981
$1,035
Assistant 1
47
$29,000
$5,800
$4,886
$3,383
Assistant 2
27
$23,000
$4,600
$3,875
$525
Assistant 3
24
$23,000
$4,600
$3,875
$411
Receptionist
25
$22,000
$4,400
$3,707
$426
Total
$182,500
$36,500
$30,748
$9,356
Grand Total
$712,500
$142,500
$136,748
$86,801
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Hypothetical reflects 2015 limitations. Contribution calculations provided by Verisight,Inc.
Verisight,Inc. is not affiliated with Oppenheimer Funds Distributor Inc.
22
$77,445
89% of total
$9,356
11% of total
New Comparability
Contribution
Age
Salary
20% Profit
Sharing
Doctor 1
54
$265,000
$53,000
$53,000
$53,000
$53,000
Doctor 2
45
$265,000
$53,000
$53,000
$24,445
$53,000
$530,000
$106,000
$106,000
$77,445
$106,000
Total
Integrated
Age
Weighted
New
Comp
Nurse 1
41
$50,000
$10,000
$8,424
$3,576
$2,500
Nurse 2
30
$35,500
$7,100
$5,981
$1,035
$1,775
Assistant 1
47
$29,000
$5,800
$4,886
$3,383
$1,450
Assistant 2
27
$23,000
$4,600
$3,875
$525
$1,150
Assistant 3
24
$23,000
$4,600
$3,875
$411
$1,150
Receptionist
25
$22,000
$4,400
$3,707
$426
$1,100
Total
$182,500
$36,500
$30,748
$9,356
$9,125
Grand Total
$712,500
$142,500
$136,748
$86,801
$115,125
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Hypothetical reflects 2015 limitations. Contribution calculations provided by Verisight,Inc.
Verisight,Inc. is not affiliated with Oppenheimer Funds Distributor Inc.
23
$106,000
92% of total
20% of income
$9,125
8% of total
5% of income
Goals Accomplished?
Maximize retirement benefits for the two doctors
 Owners get maximum permissible contribution
 Owners get 92% of total plan contributions
Minimize contributions required for staff
 Staff receives 8% of total plan contributions
Maintain contribution flexibility
 Annual funding not required
24
SUPER COMP PLANS: SAFE HARBOR
COMBINED WITH NEW COMPARABILITY
25
Traditional Safe Harbor 401(k)
 Introduced in 1999
 Solution for 401(k) plans with testing problems:
 Low employee participation
 Owners and Highly Compensated Employees can’t contribute meaningful
amounts
 Top heavy contributions required
 (Taxable) return of deferrals
26
Safe Harbor Requirements
 Contribution Requirements
 Matching contribution or
 Non-elective contribution
 100% immediate vesting
 Notice to Eligible Employees
 Amend Plan
27
Contribution Requirements
Matching Contribution
 Dollar-for-dollar up to 3% of employee compensation, plus
 50 cents on the dollar for contributions between 3% and 5% of employee
compensation
 Example: $25,000 compensation, 5% deferral
 Matching contribution = $750 + $250 = $1,000
 Enhanced safe-harbor matching formulas also permitted
 Matching contributions may be discontinued mid-year
28
Contribution Requirements
Nonelective Contribution
 3% of compensation for each eligible employee, even if they do not
participate in salary deferrals
29
Amendment and Notice to Employees
Notice:
 Advises that plan will be amended for Safe Harbor
 Describes allocation method
Existing 401(k) plans
 Amend and provide 30-day advance notice before the first day of the
plan year
30
Amendment and Notice to Employees
Existing Profit Sharing Plans
 May provide notice and amend into Safe Harbor as late as three
months before end of plan year (October 1 for calendar year plans)
New 401(k) Plans
 Minimum three months remaining in the short plan year
For Newly Established Business
 As soon as administratively feasible with as little as one month left in
the short plan year
Employer can discontinue or reduce the Safe Harbor
matching contributions upon plan amendment and 30 days
advance written notice.
31
Plan Design Problems Addressed
 No nondiscrimination testing required
 Automatically satisfies ADP and ACP tests
 Allows HCEs to contribute maximum, regardless of participation by
NHCEs
 Prevents taxable return of contributions to HCEs
 No top-heavy requirement for Safe Harbor plans that make only Safe
Harbor contributions and no further employer contributions
32
Safe Harbor Plus New Comp
Combines best features of 401(k) and Profit Sharing for owners,
principals and HCEs.
 No 401(k) nondiscrimination testing
 No top-heavy problems
 Maximum salary deferrals for Highly Compensated Employees
 Maximum profit-sharing allocations for Highly Compensated
Employees
 Minimum contributions for other employees
33
Super Comp in Action
Maximum
Deferral
Contribution
Age
Salary
Salary
Deferral
Percent
Doctor 1
54
$265,000
8.8%
$24,000
$35,000
$59,000
Doctor 2
45
$265,000
6.7%
$18,000
$35,000
$53,000
$42,000
$70,000
$112,000
Total
$530,000
Salary
Deferral
Amount
3% Safe
Harbor w/
New Comp
Total
Nurse 1
41
$50,000
0%
$0
$2,170
$2,170
Nurse 2
30
$35,500
0%
$0
$1,541
$1,541
Assistant 1
47
$29,000
0%
$0
$1,259
$1,259
Assistant 2
27
$23,000
0%
$0
$998
$998
Assistant 3
24
$23,000
0%
$0
$998
$998
Receptionist
25
$22,000
0%
$0
$955
$955
$42,000
$7,921
$7,921
$42,000
$77,921
$119,921
Total
$182,500
Grand Total
$712,500
15.8%
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Hypothetical reflects 2015 limitations. Contribution calculations provided by Verisight,Inc.
Verisight,Inc. is not affiliated with OppenheimerFunds Distributor Inc.
34
90% of total
13% of income
Works Best for:




35
Plans that have consistently failed discrimination testing
Plans making contributions of 5% of compensation or more
Employers seeking to max out contributions for owners and HCEs
Employers who want the biggest possible share of the plan
contributions allocated to the accounts of the owners/principals
DEFINED BENEFIT PLANS:
TRADITIONAL AND CASH BALANCE
36
Back in the Spotlight for Small Businesses
Popularity declined in 1980s due to unfavorable tax law changes
 Pendulum swings the other way
 January 1, 2000: Repeal of IRC §415(e)
 Renewed popularity and new opportunity
 2001: EGTRRA:
 Increased benefits
 Relief from funding limits
 2006: PPA
 Revised DB/DC combined deduction limit under Code Section 404(a)(7)(A)
 Cash balance given green light
37
Getting Results for a Small Medical Practice
Traditional Defined Benefit
Age
Annual
Pay
Monthly
Pension at
Ret. Age
Avg. Ann
Cost
% of Total
Cost
Benefit Formula:
Doctor 1
54
$265,000
$14,133
$194,863
67.5%
80% of comp
Doctor 2
45
$265,000
$17,500
$69,437
24.1%
Max. Comp:
$265K
Total
$264,300
91.6%
Nurse 1
41
$50,000
$3,333
$8,716
3.0%
Assumptions:
Nurse 2
30
$35,500
$2,367
$2,340
.8%
NRA: 62
Assistant 1
47
$29,000
$1,933
$10,183
3.5%
430 segment rates
for deduction
purposes
Assistant 2
27
$23,000
$1,533
$1,192
0.4%
Assistant 3
24
$23,000
$1,533
$945
0.3%
Receptionist
25
$22,000
$1,467
$976
0.3%
Mortality: RP 2014
Optional
Combined Rate
$530,000
Total
$182,500
$24,352
8.4%
Grand Total
$712,500
$288,652
100.00%
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Not intended to depict investment in any Oppenheimer fund. Expected results for 2015.
Costs vary with investment performance, compensation and IRS limits. Contribution
calculations provided by Verisight,Inc. Verisight,Inc. is not affiliated with OppenheimerFunds
Distributor Inc.
38
PPA Introduced New Defined Benefit Opportunities
1. Section 404(a)(7)(A) of the Internal Revenue Code expanded for
sponsors of both a DB and DC plan
2. Cash balance plans given the green light
39
PPA Gave Cash Balance Plans the Green Light
What are Cash Balance Plans?
 Defined benefit plans that look like defined contribution plans
 Participants are divided into groups by classification, similar to new
comparability profit sharing plans
 Benefits = Contribution and interest “credits”
 Contribution credits are:
 100% employer funded
 Calculated actuarially and are mandatory
 NOT limited to 25% of eligible payroll, or the defined contribution limit of
$53,000 (2015)
 Plan assets are pooled and Trustee directed
 Employer bears the burden of market fluctuations
 Earnings in excess of the minimum used to reduce future contribution
credits
40
Getting Results for a Small Medical Practice
Cash Balance Methodology
Ret
Age
Annual
Pay
Cash Balance
Contribution
Credits
Doctor 1
62
$265,000
$100,700
44.4%
Cash Benefit
Allocation
Formula:
Doctor 2
62
$265,000
$100,700
44.4%
$201,400
88.8%
38%
compensation for
doctor group, 14%
for employees
Nurse 1
62
$50,000
$7,000
3.0%
Nurse 2
62
$35,500
$4,970
2.2%
Assistant 1
62
$29,000
$4,060
1.8%
Assistant 2
62
$23,000
$3,220
1.4%
Assistant 3
62
$23,000
$3,220
1.4%
Receptionist
62
$22,000
$3,080
1.4%
$25,550
11.2%
$226,950
100.00%
Max. Comp: $265k
Assumptions:
NRA: 62
Total Contribution:
The individuals portrayed in these examples are fictional. This material does not constitute a
recommendation as to the suitability of any investment for any person or persons having
circumstances similar to those portrayed and a tax or financial advisor should be consulted.
Not intended to depict investment in any Oppenheimer fund. Expected results for 2015.
Costs vary with investment performance, compensation and IRS limits. Contribution
calculations provided by Verisight,Inc. Verisight,Inc. is not affiliated with OppenheimerFunds
Distributor Inc.
41
% of Total
Cost
Cash Balance Plans
When is a Cash Balance Plan appropriate?
 Suitable for business owners able to commit to significant annual
contributions
 Plan sponsors of a new comparability profit sharing plan who wish to
allocate even higher contributions on their own behalf
42
Potentially Best Suited for:
 Small, high revenue companies and professional groups
 Older business owners who want to build retirement assets in a
relatively short time frame
 Desire to defer more than $53,000 defined contribution limit (2015)
43
Summary
Next Steps:
 Talk to your financial advisor to determine what plan design best fits
your needs
 Visit oppenheimerfunds.com for more information on our solutions
44
Q&A
45
Disclosures
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any
other agency, and involve investment risks, including the possible loss of the principal amount invested.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to
avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment
or tax situation.
Before investing in any of the Oppenheimer funds, investors should
carefully consider a fund’s investment objectives, risks, charges and
expenses. Fund prospectuses and summary prospectuses contain this
and other information about the funds, and may be obtained by asking
your financial advisor, visiting oppenheimerfunds.com or calling
1.800.CALL OPP (225.5677). Read prospectuses and summary
prospectuses carefully before investing.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.
225 Liberty Street, New York, NY 10281-1008
© 2015 OppenheimerFunds Distributor, Inc. All rights reserved.
RE2000.339.0615 June 16, 2015
46