An employer receives a tax deduction for the compensation paid to an employee. The employee, however, does not receive a tax deduction for contributions made to The Kai-Zen Plan.^TM Employee contributions are made with after-tax dollars.

The insurance policies that are used require full health and financial underwriting. They are not guaranteed issue.

Yes, a $1,000,000 death benefit per person is the minimum.

There is no loan underwriting or qualification requirements on either the Insured (employee) or the employer. An employee’s only financial risk is the amount of their contribution to their personal trust. The trust is the borrower on the loan and only the trust has liability on the loan. The Plan is designed in such a way that the employees’ contribution together with the loan are both paid as premiums for the insurance policy which is sufficient to fully collateralize the loan.

Potentially, Yes. If an employee is 55 or younger the plan can be designed to be able to provide annual cash-flow to the employee after about 15 years. This cash-flow should continue annually for the remainder of the employee’s life and is obtained as a result of insurance policy loans so that the money is received tax-free by the employee. As an example, based upon current assumptions and plan design a 50 year old male with standard health would make annual contributions of about $44,000 per year for 5 years ($220,000 total) and then beginning at about age 65 (15 Years) he should be able to receive about $55,000 per year for the rest of his life, tax free. [Note: (1) actual cash flow is based upon age, health, policy size, interest rates and policy performance and is given as an example only; actual results will vary; (2) income taxation information is based upon federal tax law in existence on 12/31/12 and is subject to change; all participating employees are advised to consult with their personal tax advisors.]

In addition to the death benefit and the cash flow, in some plan designs there can also be long term care and critical illness benefits provided.

The Kai-Zen Plan^TM is available for men and women ages 25 to 65 at the time of entering the Plan.

Because fully underwritten life insurance policies are used all participants must qualify for the insurance. Participants must be standard or preferred health. Best performance will be for those that are Standard non –smoker, or Preferred smoker or non-smoker. In some circumstances a spouse can be used if he/she has a better health rating.

The actual number can vary, however, in general each loan will aggregate approximately $120 million of death benefit which can be 1 policy of $120 million or 60 policies of $2 million. These amount are designed to allow for financing at the most competitive rates.

The loan interest rate is typically the 1-year LIBOR rate plus 1.75% to 2.0%. The loan rate will adjust annually or semi-annually depending upon plan design. Keep in mind that participating employees have no personal liability for the loan, it is fully secured by the insurance policy and the liability is only to the trust.

The developers of The Kai-Zen Plan^TM have been doing leveraged insurance programs for over a dozen years and have excellent banking relationships. Additionally, the loans are fully secured. Most importantly, the Plan’s design aggregates many individuals together to obtain one large loan which from the bank’s perspective can be more efficiently and cost effectively administered than several small loans.

Yes, absolutely. In fact for large employers such as corporations, hospitals, law firms or medical practices customized plans can be designed with additional features and benefits.

Not in principle, however, for any employer with over 200 participating individuals we may need to obtain pre-qualification from the carriers.

Potentially with certain insurance carriers. It will depend upon the group size, average salary and type of work activity. This will generally only be available for white collar occupations.

The Plan is designed so that the participating employee makes contributions for years 1-5, the bank loan is paid as premiums into the policy during years 1-10 and then in year 15 a withdrawal is taken from the policy to pay off the bank loan (principal and interest). Thereafter the “Plan” is technically over. After year 15 the policy is no longer collateralizing the bank loan and therefore the individual is free to do what he wants with the policy (limited only by the terms of his personal trust that he designs). In rare situations, such as prolonged economic recession (i.e. 3-4 consecutive negative market performance years) the loan exit may need to be extended a few more years in order to achieve the projected results.

In general, “Yes”, however, in some plan designs terminations may be limited during the first 3 years.

A withdrawal is taken from the insurance policy either by policy loan or partial surrender to pay off the bank loan and any administration or leverage exit costs. The policy then belongs to the participant in his trust.

All employee contributions are made by check or wire sent directly to an escrow account maintained in a commercial bank which pays the funds directly to the insurance company for premiums and the administration fees to Kai-Zen Plan Advisors, LLC. The Trustee is a national trust company chartered in all 50 states which provides independent oversight over contributions to the trust, the escrow account and premium payments. Both the trust company and bank are separate and independent from the program providers. The trustee is compensated from the administration fee pursuant to a written fee agreement.

Financial reports and policy performance information is provided to participants annually.

There is a one-time enrollment fee of $2,500 that is charged at the time the Plan is set up. In addition, 5% of each annual contribution to the trust is reserved for covering administration expenses. The 5% is only reserved during the 5 years of contributions but covers all of the administration, trustee fees, reporting, accounting, actuarial, legal, tax returns etc. for the entire 15 years of the Plan.

(1) That the employee will not be able to continue making contributions for the first 5 years. In such an event the employee can terminate participation and will receive the insurance policy after the loan and termination fees are paid.

(2) Lackluster financial market returns. However, the IUL insurance policies are specially designed so that even in a negative market year the policies will not lose money (except for cost of insurance), the investment component is guaranteed by the insurance company to have a minimum return of 0%. The Kai-Zen Plan^TM has been stress tested against a “Great Depression Scenario” to make sure that the plan will be able to succeed even in the event the first 4 years are negative and 5 of the first 7 years are negative. Such a situation, however, would likely mean that the loan would take a few years more than 15 to be able to exit and achieve its results.

(3) High interest rates. It is important to understand that the success of The Kai-Zen Plan^TM is not solely dependent upon low interest rate loans. What is important is the market return relative to the loan Interest rate. The Plan is designed to meet its objectives assuming that over time the market will, on average return about 2 percentage points above the loan interest rate. In this regard the Plan has been stress tested to achieve its results assuming it was entered into during a “1980s High Interest Rate Scenario”. Additionally, caps and hedges can be obtained by the plan to protect against interest rate risks.