Bonus Plan | 1 | 30/05/2018 | AG Employee Benefits - Trust in - PowerPoint PPT Presentation

Bonus Plan | 1 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Your Bonus Plan: a Tax-Efficient Way to Reward your Employees Sample Case Comparison based on a gross bonus payment of EUR 10,000 paid out as salary vs in the form of group insurance Cash Bonus Group insurance 13,000 Cost to employer 13,000 Cost to employer -3,000 Employer NOSS contribution. 8.86% Employer NOSS contribution (30%) - 1,521.98 10,000 Tax 4.4% Gross salary -1,307 - 57 Employee NOSS contribution (13.07%) Management fees 0,5% Tax (53,5%) -4,650.76 (incl. 7% municipal tax) Net bonus for the employee 4,042.25 Net investment for the employee 11,420.63 €4,042.25 €13,000 €11,420.63 Cash Bonus Plan 87.85% 31,09% | 2 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

What return is possible when you invest in group insurance? Affiliated for 40 years – Capitalized product Cash Group Insurance EUR 13,000 EUR 13,000 = 0.75%  30% Employer Social Security  8.86% Soc. Sec.  13.07% Employee Social Security  4.4% Tax  0.5% Management  53.5% tax + 7% municipal tax costs NET NET EUR 11,420.63 EUR 4,042.25 x 25 years  n = 25 years  capital EUR 315,098.14 In order to reach the same retirement benefit amount, an  EUR 6,301.96 2% solidarity contr. investment of the net salary must  EUR 11,185.98 3.55% Soc. Sec. generate a return of 7.27%.  EUR 31,844.29 Tax* EUR 265,765.90 *10.09% withholding tax + 7% municipal tax | 3 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Benefits of a Bonus Plan For the employee Cash option: taking out an advance – Advance = amount the affiliate can obtain on the accrued reserves in his/her group insurance contract while the same guaranteed interest rate and profit sharing continue to apply – Conditions: granted for the purchase, construction, improvement or renovation of real estate in the European Union (if self-employed status: in the European Economic Area) – Choice between three types of advances: ► advance with yearly interest payments at a fixed interest rate (5%) ► advance with yearly interest payments at a variable interest rate (1.25%) ► advance with no yearly interest payments (interest rate will depend on the guaranteed return and annual profit sharing) – Benefits: employees can take immediate advantage of employer contributions, with no handling or management fees to pay, and no adverse effects on the guaranteed interest rate or profit sharing. | 4 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances What are the different types of advances? There are 3 types of advances : • Advances with yearly interest payments – at a fixed interest rate – at a variable interest rate • Advances without yearly interest payments | 5 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances How much will an advance on my Pension4Life contract cost me? • Advance with yearly interest payments – How does it work? The affiliate applies for an advance and pays interest annually in advance. – What is the interest rate ? The affiliate may choose between a fixed or variable interest rate. • Fixed rate: 5.0% • Variable rate: 1.25% – Are the interest payments tax deductible? The affiliate may deduct the interest payments on his/her tax return in accordance with the applicable principles of personal income tax. | 6 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances How much will an advance on my Pension4Life contract cost me? • Advance without yearly interest payments – How does it work? Interest is due in full when the advance is paid back or on the contract maturity date. – What is the interest rate ? The interest rate is calculated based on the guaranteed return, annual profit sharing and the financial margin. – Are interest payments tax deductible ? The affiliate may deduct the interest on his/her tax return when the advance is paid back or on the group insurance contract maturity date, in accordance with the applicable principles of personal income tax. | 7 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances How will this affect the return I earn on my group insurance investment? • Applying for an advance has no effect on group insurance returns. • ROI and profit sharing will continue to apply to the total amount of reserves in the contract (i.e., including the amount taken as an advance) • The net cost of the advance is therefore equal to the difference between: – The total return on the group insurance contract (guaranteed interest rate + profit sharing) – The interest rate on the advance | 8 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances How much can I take out as an advance? • The maximum amount is calculated in accordance with the applicable principles of Belgian legislation . Accrued reserves: - Tax liability and parafiscal charges deducted at maturity - Surrender fees (if surrenders are authorised) - Interest (only for advances without yearly interest payments) = Maximum advance • Maximum amount that can be taken as an advance: – 50-74% * • M inimum amount that can be taken as an advance: €5,000 * Percentages vary according to age | 9 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances How and when do I pay back the advance? • No obligation to repay the advance! • If the affiliate opts not to repay the advance during the lifetime of the group insurance contact: – The advance will be deducted from the retirement proceeds payable on the contract maturity date. • If the affiliates opts to repay the advance: – Repayment can be made at any time, in full or in part. – Repayment must be at least 10% of the advance, with a minimum payment of €250. | 10 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances A practical example  Variables Duration of the advance = 20 years (from age 45 to 65)   Guaranteed return = 0.75%  Profit sharing = 1.75%  Advance with annual interest payments: interest rate = 5%  Advance without annual interest payments: Interest rate = 5%  Cost of opportunity  Definition: the appraisal of the loss of the next best alternative to an economic decision  Applied to advances:  Advance with annual interest payments: each year the interests have to be paid  Advance without annual interest payments: payment of the interests on settlement  Conclusion: in case of an advance without annual interest payments the amount of the annual interests is kept available for investment.  The (unrealised) return on this investment = opportunity cost of an advance with annual interest payments. | 11 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

A practical example Advance with annual Advance without annual interest payments interest payments Situation at withdrawal of the advance (age 45) Total reserves 50.000,00 € 50.000,00 € Total advance 25.000,00 € 25.000,00 € Annual interests 1.250,00 € 0,00 € Situation on settlement (age 65) Total reserves 82.140,90 € 82.140,90 € Taxes 10.426,37 € 10.426,37 € Total advance 25.000,00 € 25.000,00 € Annual interests 25.000,00 € 41.198,03 € Net result 21.714,53 € 5.382,09 €  Taking an opportunity cost of 5% into account (= the loss of a possible return of 18.399,06 € ), the end result of the advance with interest payments = 3.315,47 €. Conclusion: from a purely economic perspective, the two types of advances are equivalent alternatives | 12 | 30/05/2018 | AG Employee Benefits - Trust in Expertise

Spotlight on Advances Summary of key features ► An attractive interest rate (low net cost!) ► 3 types of advances to choose from:  Advances with yearly interest payments at a fixed interest rate  Adcances with yearly inteets payments at a variable interest rate  Advances with no yearly interest payments • No administrative fees or legal fees , unlike mortgage loans  Advances can be repaid at any time.  The (guaranteed) interest rate and profit sharing will continue to apply to the total amount of reserves in the group insurance contract.  Your account will be managed by a team of specialists. | 13 | 30/05/2018 | AG Employee Benefits - Trust in Expertise