outline of today’s discussion who is peachtree? what is lbp? case studies action steps

Outline of today’s discussion

• Who is Peachtree?• What is LBP?• Case Studies• Action Steps

Who is Peachtree?

• Peachtree LBP• Administrator for LBP Program• Finance company providing premium loan

origination and loan servicing• Independent SSO

Who is Peachtree?

• The Peachtree Family of Companies• Established in 1996• 350+ Employees• Over $4 Billion in Committed Financing• Administer Over $2 Billion in Originated

Assets• IPO March 2006 - LSE: PSF• Private November 2006 – DLJ/Credit

Suisse

What is LBP?

• “Leveraged Bonus Program”• Individually Owned Retirement Plan

• 3 Key Ingredients• After-Tax Dollars from EE• Tax Replacement Loan• Interest Paid by ER

• Emulation of Retirement Arrangements• Focus on 401(k) Plans

Why a 401(k) Plan?

• Large, Untapped Market• 90% of Companies Have a 401(k)• 401(k) Challenges

• 70% Have Testing Issues • Top-Heavy Compliance (HCEs)• Limited Solutions for Employers

Traditional Options

• Remain Top-Heavy• Continuous Testing Concerns• Refund Contributions to HCEs• Spend in other ways for HCEs

• Create a “Safe Harbor” Plan• Permanently Ends Testing Concerns• Non-elective contribution (3%)

Traditional Options

• Is there a better choice?

LBP401(k) Plus

$9000

$6000 (IRS)

Age 59½

Taxable

Age 70½

RMDs

Taxable

$9000 ANY AGE

Tax-Free(if done properly)

Grow

s Tax

Deferred

%

401(k) $15,000

Grow

s Tax

Deferred

%

$6000 LBP®$6000 (IRS)

$15,000LBP401(k) PlusSM

401(k) $15,000

$9000

$6000 (IRS)

Grow

s Tax

Deferred

Age 59½

Taxable

Age 70½

RMDs

Taxable

LBP® $15,000

$9000

$6000 LBP®

Grow

s Tax

Deferred

ANY AGE - Tax-Free

(done properly)

%

%

Permanently Eliminate 401(k) Top Heavy Testing Issues

Payroll: $5.0M

$150K

10 HCEs

$60,000

$144K

401(k) $15,000

$9000

$6000 (IRS)

Grow

s Tax

Deferred

Age 59½

Taxable

Age 70½

RMDs

Taxable

LBP® $15,000

$9000

$6000 LBP®

Grow

s Tax

Deferred

ANY AGE - Tax-Free

(done properly)

%

%

x 10%

$6,000

3% Non-elective

• For the Company:• Existing 401(k) Plan stays in place• Selective Participation• Permits maximum contributions for key executives• Deductible• Permanently eliminates testing issues at a

fraction of the cost

LBP 401(k) PlusSM

• For the Participant:• Unlimited contributions • Tax deferred growth for retirement • Tax-favored income at retirement• Pre- and post-retirement death benefits

LBP 401(k) PlusSM

Case Studies

Case Study: LBP® vs. Safe Harbor

• Business received 2006 Testing from the TPA

• Plan failed HCE/NHCE Testing• $5.4 Million Payroll• 17 HCE’s• Company had used Safe Harbor to resolve testing

issues (3% non-elective match)


8.79%

2.18%

2006 Highly Comp Group Avg.

2006 Nonhighly Comp Group Avg.

“corrective action is needed”


• Current Safe Harbor Plan: • $164,490 (3% non-elective)

• Instead … utilize LBP 401(k) PlusSM:• $24,475 (year one)

LBP 401(k) PlusSM vs. “Safe Harbor”

Hurdle Rate: This figure is a corporation’s incremental cost of capital or required rate of return. LBP Indirect Savings: This reflects the incremental earnings for the particular year on the cumulative LBP Direct Savings (including prior incremental earnings), based on the company’s Hurdle Rate. LBP 401(k) Plus Cost: Bonus to executives for annual loan interest. In years 1and 6, this figure also includes the bonus to cover the LBP loan commitment fee. Loan interest rate: 12 Month LIBOR plus a fixed 1.95%. LBP Loan Commitment Fee: 2% charged in year 1 and 6 of the total loan amount expected over 5 years.

Case Study: 401(k) Enhancement

• Peachtree LBPSM was approached by a company with a voluntary 401(k) plan.• Payroll of $62,000,000• 120 Employees not able to participate at the

maximum deferral amounts• Deferrals have been refunded the last 3 years

because the plan failed the ADP test • “Safe Harbor” was not an option because of cost

Case Study: 401(k) Enhancement

• Original recommendation: • create a “safe harbor” plan• minimum cost: $1,860,000 (3% of payroll) per year

• Instead … provide LBP® : • Cost: $212,640 year one


Hurdle Rate: This figure is a corporation’s incremental cost of capital or required rate of return. LBP Indirect Savings: This reflects the incremental earnings for the particular year on the cumulative LBP Direct Savings (including prior incremental earnings), based on the company’s Hurdle Rate. LBP 401(k) Plus Cost: Bonus to executives for annual loan interest. In years 1and 6, this figure also includes the bonus to cover the LBP loan commitment fee. Loan interest rate: 12 Month LIBOR plus a fixed 1.95%. LBP Loan Commitment Fee: 2% charged in year 1 and 6 of the total loan amount expected over 5 years.

The LBPSM “30-Day Plan”

• Day 1: Introduction to LBP

• Day 15: LBP Mechanics• Sales Process• Enrollment & Implementation• Administration

• Day 30: Onsite Meetings• Client Presentations• Enrollment

Day 15: LBP Mechanics


• Sales Process• Prospecting with LBP• Company Decision Cycle• Company Cost Analysis• Presumptive Closing Steps



• Enrollment & Implementation• Steps in Process• Timeline• Peachtree’s Roll



• Enrollment & Implementation• Steps in Process• Timeline• Peachtree’s Roll

• Administration• Technical Structure of LBP• How to work with Peachtree

Action Steps• Identify 5 prospective businesses

• Company has a 401k plan• Utilize Prospecting Call Script

• Have you had Top-Heavy issues in the past or currently?

• Have you refunded 401k contributions back to HCEs?

• Utilizing or considering a “safe harbor” plan• Would you be interested in permanently

eliminating Top-Heavy testing issues?

• Utilize Napkin Pitch and Script• Call LBP for Support

outline of today’s discussion who is peachtree? what is lbp? case studies action steps

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