THE CHANGING FACEOF RETIREMENTQUALIFIED LONGEVITY ANNUITY CONTRACTS (QLACs)

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What is a qualified longevity annuity contract (QLAC)?

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In 2014, the US Department of Treasury passed new guidelines that allow people to buyannuities within their IRAs. These annuities are called QLACs.

- QLACs allow individuals to defer the required payments starting at 70 ½ for qualified funds

The QLAC finally allows Americans to buy guaranteed lifetime income with their pre-taxretirement funds and defer the required minimum distributions up to the age of 85.

QLACs have all the same characteristics of deferred income annuities, the type Abaris sells,but DIAs have to be funded with post-tax dollars.

WHY IS THIS BIG NEWS ?

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This is a major policy step towards providing Americans the path to a secure retirement.

Previously, Americans that were a part of certain retirement plans could ensure they did not outlive their money but they had to use post-tax money.

That meant Americans had to, either

A) Take money out of their IRAs, pay an early withdrawal penalty and taxes before funding an annuity.

B) Have enough money saved outside of their 401(k)s and IRAs to fund an annuity.

For Americans that used pretax funds to purchase annuities, distributions had to begin bythe age of 70 ½. These distributions can now be deferred up to age 85.

WHAT DOES THIS MEAN FOR MY RETIREMENT?

The rules state that individuals can contribute the lesser of $125,000 or 25% of your IRA balance.

That means you can now ensure your hard earned savings do not run out later in life by simply transferring a portion of your pre-tax savings to a QLAC.

There’s also a big tax benefit from buying a QLAC in your retirement plan that we’ll discuss in the next few slides.

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TAX IMPLICATIONS OF QLACs

The money saved in your IRA is subject to a Required Minimum Distribution (RMD).

The IRS mandates RMDs beginning at age 70 1/2. - Each year the RMD is calculated based on IRS tables of your expected lifespan.

QLACs allow you to defer payments until 85, but also lower the balance of your IRA. - This lowers your RMDs each year and thus lowers your taxes.

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A QLAC EXAMPLE

Jim is a 70 year-old single male living in Pennsylvania.

He has saved $1,000,000 for retirement in his IRA.

We’ll compare the yearly income and taxable RMDs for Jim assuming:

A) He chooses to keep all his money in the IRA and earns 4% annually.

B) He funds a $125,000 QLAC that starts at 80, keeps $875,000 in his IRA and earns 4% annually on that money.

See QLAC example notes for extended assumptions. 6

JIM’S INCOME & RMD TAXES AT 70

IRA BALANCE

YR. 70 RMD

YR. 70 RMD TAXES

QLAC INCOME

TOTAL INCOME

NO QLAC WITH QLAC

$1M$825K

$36,497$31,934

$10,219$8,941

$26,278

$22,993

$0$0

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At 70, Jim’s income without a QLAC is higher, but that will change as the QLAC begins payout, as we will see next

JIM’S INCOME & RMD TAXES AT 80

IRA BALANCE

YR. 80 RMD

YR. 80 RMD TAXES

QLAC INCOME

TOTAL INCOME

NO QLAC WITH QLAC

$981,053$832,171

$50,858$44,501

$14,240$12,460

$37,657$56,255

$0$24,214

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At 80, Jim’s total income with a QLAC is higher compared to a retirement strategy without a QLAC

IRA BALANCE

YR. 90 RMD

YR. 90 RMD TAXES

QLAC INCOME

TOTAL INCOME

NO QLAC WITH QLAC

$704,130$616,766

$61,766$54,045

$17,294

$15,132

$44,471$63,126

$0$24,124

JIM’S INCOME & RMD TAXES AT 90

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By 90, Jim’s total income with a QLAC is still higher and his taxes on the RMD are lower compared to a retirement strategy without a QLAC

Takeaways From Jim’s Example

At age 70, Jim funded a QLAC, that: - Lowered his tax burden on his RMD by $4,563

At age 80, with a QLAC- Jim’s total yearly income was $18,598 higher than if he just used his IRA- Paid $1,780 less taxes on his RMD

By age 90, with a QLAC- Jim’s total yearly income was $18,655 higher than if he just used his IRA- Paid $2,162 less taxes on his RMD

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THE QLAC MARKETS TODAY

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As the Treasury just announced these regulations late last year, insurance companies are hard at work creating QLAC products

As of today, three companies have announced a QLAC product - AIG announced their product in Nov 2014 - Principal Financial announced a product in Jan 2015 - Americo announced a new QLAC product in Feb 2015

It is expected that by the second half of 2015 many more insurance companies should be carrying these products

I’m thinking about buying a QLAC - WHAT SHOULD I DO?

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Abaris suggests clients wait a few months to purchase their first QLAC - As more insurance companies enter the market, there should be more options available for customers

However, if you’re about to retire or reach 70 ½: - Meet with your financial advisor or talk with Abaris about purchasing a QLAC to make sure you’re a fit - Review the contribution amounts for QLACs with your advisor and consider consolidating your IRA funds before purchasing the QLAC

QLACS EXAMPLE NOTES

This example is strictly for illustrative purposes and does not constitute investment advice

Example assumes single male at age 70, PA resident

$125,000 purchase of AIG General Pathway DIA

IRA balance assumes 4% yearly growth rate

28% statutory tax rate on the RMD distributions

Example does not consider taxes paid on the distribution from a QLAC product

13QLAC pricing is estimated with AIG DIA product for illustrative purposes

DISCLAIMER

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The information contained in this presentation, is provided for general informational purposes as a convenience to Abaris Financial Inc. customers and Internet users and is based upon information generally available to the public from sources believed to be reliable. Although we believe the information provided herein is reliable, we have not verified this information and we do not guarantee its accuracy, completeness, timeliness or availability. Any examples shown in this presentation are purely hypothetical and have been included for demonstrational purposes only. This information is subject to change without notice. This information is not a substitute for obtaining advice from a qualified professional. Therefore, you should not rely solely upon this information in making any decision. This information is not and does not constitute an offer to sell or a solicitation of an offer to buy any security, service or product.

Abaris Financial Inc., Philadelphia, PA is neither a registered broker-dealer nor a registered investment adviser. Nothing in this presentation, including links to other material, is intended as legal or tax advice. Abaris Financial Inc.’s Licensed Producers do not give legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.

QLACS IN THE NEWS & OTHER GOOD REFERENCES

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Recent attention the QLACs have received in the news:- New York Times, MarketWatch, Retirement Income Journal

Treasury’s Detailed Regulations: - Regulations, Press Release

Insurance News on the QLAC; - Principal Financial, AIG