Allianz Life Insurance Company of North America Business

Allianz Life Insurance Company of North America Business 2 Benefits: Nonqualified deferred compensation plans PPT-426 2962021. 1

Agenda 01 02 03 04 What is FIUL? NQDC plan and it benefits How to fund an NQDC Plan with FIUL? Hypothetical example

Fixed Index Universal Life Insurance Generally income-tax-free death benefit protection • • • 1 Policy Income replacement Final expenses Mortgage and other debt Supplemental college funding Other financial emergencies and needs Living advantages • Potential to build accumulation value • Tax advantages • Access to any available cash value 1 through policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a Modified Endowment Contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional. 3

FIUL offers a combination of THREE TAX ADVANTAGES 1 INCOME-TAX-FREE Death benefit¹ 2 TAX-DEFERRED Cash value accumulation potential 3 INCOME-TAX-FREE Loans and withdrawals 2 1 The death benefit is generally income-tax-free to beneficiaries. 2 Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional.

What is an NQDC? A nonqualified deferred compensation (NQDC) plan allows employees to set aside benefits that they can access later – and defer income taxation until the benefits are paid. 5

Cost effective for your business Reduce employee’s annual income tax liability Survivor benefit BENEFITS OF NQDC You should discuss with your attorney and tax advisor whether an NQDC plan is appropriate for you. Your attorney will create NQDC documents for you. The parties will work with their respective tax advisor or attorney to ensure that the plan document conforms with Internal Revenue Code section 409 A requirements. There are notice and consent requirements for employer-owned life insurance that all parties will need to review and sign, plus provide ongoing reporting to the IRS regarding policy ownership. Any financial vehicle used to fund plan obligations is subject to company creditors. The business can contribute to the plan, if desired, whether or not the employee actually defers salary to the plan. Since life insurance is an underwritten product, any strategy that includes life insurance as the informal funding vehicle is contingent on the health and financial underwriting of the insured.

Two ways FIUL can fund NQDC Upon the insured’s death, a death benefit is paid to the employer, which is used to pay a survivor benefit. Upon the insured’s retirement, the employer may access the accumulation value via income -tax-free policy loans or withdrawals 1 to pay the benefits. Keep in mind that any benefits paid to your employee (or the employee's beneficiaries) are fully taxable to them as ordinary income, and are subject to payroll taxes. 1 Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional.

Hypothetical example Gary • Key employee at Synergy, his employer • $200, 000 salary • Participates in an NQDC Has life insurance needs for family and to supplement income and diversification for retirement. Defers 10% of annual income ($20, 000) Pays premium as owner/beneficiary This hypothetical example is provided for illustrative purposes only. The character is fictional and not an actual Allianz client.

Scenario 1: Gary dies prior to retirement This hypothetical example is provided for illustrative purposes only. The character is fictional and not an actual Allianz client.

Scenario 2: Gary reaches retirement Retirement benefits Policy loans This hypothetical example is provided for illustrative purposes only. The character is fictional and not an actual Allianz client. Policy loans and withdrawals will reduce the available cash value and death benefit and may cause unintended consequences, including lapse or taxable events. Please see the full loan and withdrawal disclosure within this material for details.

Considerations • You should discuss with your attorney and tax advisor whether an NQDC plan is appropriate for you. • Your attorney will create NQDC documents for you. • The parties will work with their respective tax advisor or attorney to ensure that the plan document conforms with Internal Revenue Code section 409 A requirements. • There are notice and consent requirements for employer-owned life insurance that all parties will need to review and sign, plus provide ongoing reporting to the IRS regarding policy ownership. • Any financial vehicle used to fund plan obligations is subject to company creditors. • The business can contribute to the plan, if desired, whether or not the employee actually defers salary to the plan. • Since life insurance is an underwritten product, any strategy that includes life insurance as the informal funding vehicle is contingent on the health and financial underwriting of the insured. 11 You should consult your tax advisor and/or attorney to discuss your specific situation.

CONSIDER FIUL TO QUESTIONS? HELP FUND AN NQDC PLAN THANK YOU. QUESTIONS? 12

This content is for general educational purposes only. It is not intended to provide fiduciary, tax, or legal advice and cannot be used to avoid tax penalties; nor is it intended to market, promote, or recommend any tax plan or arrangement. Allianz Life Insurance Company of North America, its affiliates, and their employees and representatives do not give legal or tax advice. Customers are encouraged to consult with their own legal, tax, and financial professionals for specific advice or product recommendations. An employer-owned life insurance policy may be subject to the requirements of Internal Revenue Code 101(j) in order to obtain an income-tax-free death benefit. In general, those rules require that before the policy is issued, the employer must provide the insured with a written notice of the life insurance and obtain a written consent from the insured. Consult with an attorney for application of those rules to a specific situation. Product and feature availability may vary by state and broker/dealer. Guarantees are backed solely by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. www. allianzlife. com Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416 -1297. 800. 950. 1962. 13