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WELCOME

Opening doors in manufacturing

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Benefits Reimagined:�Smarter Strategies, Stronger Outcomes

AGENDA
8.00 – 8.30	Breakfast / Networking
8.30 - 8.40	Welcome
8.40 – 9.00	Matt Richard, Vice President, Alliant Insurance Services
9.00 – 9.20	Jake Bishop, Regional Sales Director, Garner Health
9.20 – 9.50	Lee Palmer, Executive Director, Wells Fargo (National Co Head of ESOP Advisory)
9.50 – 10.20	Kathleen Monahan, Financial Advisor, Alliant Retirement Consulting Joseph D’Alconzo, Retirement Plan Consultant – Lead, Alliant Retirement Consulting
10.20 – 10.30	Q & A
10.30 – 11.00	Tour of CBT Company (Optional)

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Benefits Reimagined: Smarter Strategies, Stronger Outcomes!

July 10^th, 2025

Matt Richard

Vice President

Alliant Insurance Services, Inc.

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��Medical Insurance�Funding

4

Agenda

What is Funding ?

Fully-Insured v. Self-Insured Plans – a Comparison

Danielle Dunn

Alliant Insurance Services

Matt Malkin

Alliant Insurance Services

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What is Funding?

5

The means by which an employer pays for employee benefit programs

The spectrum can range from Fully-Insured (paying premium to carrier who covers all claims) to Self-Insured (employer pays administrative fees and all actual claims)

Most common approach for employers is Partial Self-Insured plans (with reinsurance for large catastrophic claims)*

*45% of area Manufacturers are Fully-Insured while 50% are Self-Insured w/Stop Loss (2025 Manufacturing and Wholesale Distribution Compensation & Benefits Benchmarking Survey)

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Fully-Insured vs. �Self-Insured Comparison

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Self-Insured Refresher

Provider

Carrier/Admin

Employer

Employee

Works like a fully- insured plan

Same carrier

Same plan design

Same ID card with carrier/administrator name

Works like a fully- insured plan

Same network and access

Same account management team

Still makes all claims decisions, processes claims and send payment to provider

In carrier self-funded model, can act as claim fiduciary if contracted to provide service

Pays administrator fixed fee (PEPM) to access network, process and pay claims, answer customer service calls on their behalf

Pays reinsurance carrier a fixed fee (PEPM) to insure program from having catastrophic claim on a single individual (stop-loss coverage)

Pays reinsurance carrier premium (PEPM) to insure program from having extremely high claims on group as a whole (aggregate stop-loss coverage)

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Funding Options

8

Fully-Insured Non-Refunding	Fully-Insured Refunding	Minimum Premium / Level Funding	Self-Funded with Stop-Loss	Self-Funded without Stop Loss
				Unlimited Claims Liability
		Margin
	Margin
Pooling Charges	Pooling Charges	Pooling Charges	Optional Margin
Administration	Administration	Administration	Stop Loss Premiums	Optional Margin
			Administration*	Administration*
Paid Claims (Excluding Pooled Claims)	Paid Claims (Excluding Pooled Claims)	Paid Claims (Excluding Pooled Claims)	Paid Claims (Excluding Pooled Claims)	Paid Claims (Excluding Pooled Claims)

Less risk, less flexibility More risk, more flexibility

*Includes ACA fees (PCORI), claim processing, network access

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Funding and Risk Management

Fully-Insured

Minimum Premium

Self-Funding

Fully-Insured

(Dividend Eligible)

Cost Savings

Financial Risk/Reward

Predictability
Limited Transparency
Limited Flexibility
Limited Reporting

High

Low

Gap Funding

Claim variability
Full Transparency
Full Flexibility
Comprehensive Reporting

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Self-Funded vs. Fully Insured

10

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July 10, 2025

How Provider Performance Impacts Health Plan Costs

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Introductions

Today’s Speaker

Jake Bishop

Regional Sales Director

Garner Health

jake.bishop@getgarner.com

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Medical trend is accelerating and employers need new solutions that do not simply shift cost to employees

Source: Data from large employer consultants, Kaiser Family Foundation and US Federal Reserve, KFF, The American Journal of Medicine. “Healthcare services” defined as greater than one specialist claim.

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Employees declare bankruptcy when receiving healthcare services

Average US Employer Medical Trend

US Family Functional Insurance

Proprietary & confidential. Do not distribute.

13

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These accelerating costs are driven by declining quality and increasing prices across all types of care

Source: Data from the Bureau of Labor Statistics, Health Affairs, Kaiser Family Foundation, American Joint Replacement Registry and Garner.

Increasing Prices

Declining Quality

% of Surgeries Performed Against Guideline

(e.g. before conservative treatment applied, using a maximally invasive technique,

or inappropriate for patient)

Average Price of Top 25 Major Surgeries

31% more than overall US price inflation during the same time period

Proprietary & confidential. Do not distribute.

14

{3.2.1 - 2025-03-03}

We believe if you're actually going to change the performance of the average health plan in this country, it's important to use the data to get one level deeper and understand why these cost increases have been occurring.

And we think it's really down to two major things.

First, prices have been going through the roof.

So here we show the average price of the top 25 major surgeries in the US has more than doubled over the last 20 years.

That's much faster than the pace of overall economy inflation over the same time period.

So providers are charging more than they ever have for the exact same care.

And at the same time, we also see a lot more care being delivered, a lot more surgeries, tests, office visits, and largely that's due to declining quality.

And so we track over 500 metric metrics of quality here at Garner.

And here you can see the percentage of surgeries performed against clinical guideline think surgery before physical therapy or a maximally invasive surgery when a minimally invasive is available.

That number has more than doubled over the last 20 years.

So basically you're getting more expensive care than ever with lower quality than ever.

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Good news: healthcare cost and quality can be dramatically improved by getting more care to the best performing doctors

Data shown for average of Top 30 US Cities. Data from Health Affairs, Kaiser Family Foundation, American Joint Replacement Registry and Garner.

Fairer Prices

Higher Quality

Average Price of Top 25 Major Surgeries

% of Surgeries Performed Against Guideline

(e.g. before conservative treatment applied, using a maximally invasive technique,

or inappropriate for patient)

of doctors

Proprietary & confidential. Do not distribute.

15

{3.2.2 - 2025-03-03}

The good news is, now that we understand this problem, we can use the data to really do something about it.

And we think the data is very clear.

As you may have heard, we have over 300 million patients worth of data in our data set, and we've analyzed it to figure out what can you really do to change the equation for the average health plan?

We think the data is very clear that the number one thing you can do by far is get more care to the top performing doctors in your existing networks and local geographies.

So just as an example of that, if we take those same two metrics that we looked at here on the left, the average surgery price for the top 25 surgeries, you get a 50% decline simply by choosing the appropriate doctor in the local market.

And that that's both because the doctor bill.

But also what facility do they work at?

What's the site of service?

Where do they discharge the patient?

All of that is driven by the doctor.

So you get a much fairer price if you use the data to go to the right, most efficient doctors.

And at the same time, you also get higher quality and thus lower utilization of care.

So if you look at the percentage of surgeries performed against guideline, you can eliminate almost all of those, all of that surgery before PT, all of those maximally invasive surgeries, simply by choosing the right high quality doctor in your local market.

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The key to lowering healthcare costs while improving outcomes is understanding the performance of individual doctors

Source: Based on Garner’s analysis of medical claims nationally

Complication rates after joint replacement surgery

Doctors

Practicing at those hospitals

Hospitals

US News and World Report Top Hospitals

40%

30%

20%

10%

0%

Cedars Sinai

NYU

UCLA

Mayo Clinic

Top Performing Doctors

40%

30%

20%

0%

10%

Proprietary & confidential. Do not distribute.

16

As an example of this, here is a case we like to use: an employee at Garner had family member last year that got diagnosed with Cancer and needed to find a provider.
The patient did what most people do and looked on US New and World Report. You can see here are the top performing hospitals. Looking at this data you might think I want to go to the Mayo Clinic.
Here at Garner we analyzed our database of 310 million patients to show the performance of doctors practicing at those hospitals (each bar is colored by where the doctors practice medicine).
You can see the massive difference.
If you zoom in on the Mayo Clinic you see massive performance variation.
This highlights the need to use the data to find a top performing doctor.
Top doctors exist in all hospital systems and in all different geographies.
Also, while we’re showing an infection rate after surgery, this same idea applies to all aspects of practice: the accuracy of diagnosis, whether doctors follow guidelines on when to do surgery, the site and cost of surgery, etc.
I know I’m not the first person to talk about physician performance to you. However, up until now, there have been two types of solutions: (1) health plan solutions like narrow networks (these are built around hospital systems so they don’t solve the problem + have tons of friction for employees + integrations) or (2) care navigation tools (which are easy to implement and low friction but nobody uses so they don’t really do anything).

{3.2.3 - 2025-03-03}

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In addition to quality variation, healthcare transparency data show a large opportunity to identify low cost local providers

Cost of Joint Replacement by Doctor (New York City, Cigna OAP)

Proprietary & confidential. Do not distribute.

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To illustrate the power of provider choice, we pulled the most popular local doctors from a Chicago employer before and after deploying a steerage program

THE MOST POPULAR SPINE DOCTOR AMONG EMPLOYEES…

Dr. Carl Graf�Spine Orthopedist

NPI: 1700981107�Chicago, IL

Before Implementing steerage

After Implementing steerage

Dr. Christopher Dewald�Spine Orthopedist

NPI: 1952334948�Chicago, IL

5

0

5

1

TOP PROVIDER

Proprietary & confidential. Do not distribute.

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{9.4 - 2025-01-26}

Not only do we have more data than anyone else, but we have a very different and we think significantly better improved methodology to how to actually understand doctors.

And we're probably not the first people to talk about data and analytics.

So we think it's easier to actually just show you how this works in the real world.

And so what we did is we pulled two doctors from an actual client case study.

So before this is a medium sized client that we work with that had a good amount of orthopedic care in Chicago.

And one of their most popular doctors before Garner was implemented was this Doctor Dewald here who's a spine orthopedist in Chicago.

Um, And afterwards, we were able to successfully shift a lot more of the care to Doctor Graf.

And so what I want to do is show you one level deeper under the hood into these two providers, and how we rank them as compared to the standard methodologies that have been in the industry.

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Proprietary & confidential. Do not distribute.

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{9.6.3 - 2025-01-26}

So first I'll show you what the industry has been doing.

So almost all carriers, analytics, vendors, everyone you talk to about provider quality will use something called an episode grouper to understand provider performance.

And these things have been around since the 90s.

They haven't evolved a whole lot, and it's actually a really simple process.

All it does is take last year's cost per patient.

So you go through the claims data, you figure out which claims are associated with orthopedics and spine care, and then you just do an average cost per patient for every doctor.

And this is you can see here that Doctor Dewald would actually have has last year a really low, reasonably low cost per patient about $13,000 and Doctor Graf a little bit higher.

And so the standard methodologies would show you that Doctor Dewald is a higher performer in Doctor Graf underperforming.

Well, now I want to show you our bottoms up approach, measuring all the individual aspects of these doctor's Doctors practice.

So we'll tell you some facts.

So first of all, Doctor Dewald is much more likely than average to do surgery before PT.

So on 15% of patients is doing surgery before PT versus 3% for Doctor Graf.

He uses a lot more maximally invasive fusion techniques.

Doctor Graf almost never uses those.

His complication rate is about four times higher than Doctor Graf's, actually more than four times higher, his revision surgery rate also four times higher.

And if you think about the price of this care, he's doing much more of his surgeries in patient when they could be done outpatient and get the patient back to home, and also save a lot from the bill and lower the risk of infection.

And so that what that means is that when the doctor does do surgery, he has a much higher cost than Doctor Graf, even though both of these doctors actually do most of their surgeries at the same hospital of Rush in Chicago.

And as a result of all of this.

Our view is that actually Doctor Graf is a much higher quality and more efficient doctor.

And you may ask, well, wait, wait, hold on.

How could it be that that then Doctor Dewald has such a low cost per patient?

Well, the thing that really drives those legacy methodologies is just randomly who shows up into that doctor's office and how severe their back pain was.

So maybe Doctor Dewald had a bunch of patients who had one visit and whose back actually just started to feel better the next day, and all they had was an office visit.

Well, that's going to drag down Doctor Dewald's cost per patient.

And maybe Doctor Graf had a lot of patients that had some really severe issues that really need treating, and that's going to drive his up.

And there's no way to adjust for that in the data.

And so we think it's really critical if you're going to actually understand, care and manage costs to go bottoms up and measure everything about these doctors in this way to create higher quality and more efficient care.

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Proprietary & confidential. Do not distribute.

20

{9.6.3 - 2025-01-26}

So first I'll show you what the industry has been doing.

So almost all carriers, analytics, vendors, everyone you talk to about provider quality will use something called an episode grouper to understand provider performance.

And these things have been around since the 90s.

They haven't evolved a whole lot, and it's actually a really simple process.

All it does is take last year's cost per patient.

So you go through the claims data, you figure out which claims are associated with orthopedics and spine care, and then you just do an average cost per patient for every doctor.

And this is you can see here that Doctor Dewald would actually have has last year a really low, reasonably low cost per patient about $13,000 and Doctor Graf a little bit higher.

And so the standard methodologies would show you that Doctor Dewald is a higher performer in Doctor Graf underperforming.

Well, now I want to show you our bottoms up approach, measuring all the individual aspects of these doctor's Doctors practice.

So we'll tell you some facts.

So first of all, Doctor Dewald is much more likely than average to do surgery before PT.

So on 15% of patients is doing surgery before PT versus 3% for Doctor Graf.

He uses a lot more maximally invasive fusion techniques.

Doctor Graf almost never uses those.

His complication rate is about four times higher than Doctor Graf's, actually more than four times higher, his revision surgery rate also four times higher.

And if you think about the price of this care, he's doing much more of his surgeries in patient when they could be done outpatient and get the patient back to home, and also save a lot from the bill and lower the risk of infection.

And so that what that means is that when the doctor does do surgery, he has a much higher cost than Doctor Graf, even though both of these doctors actually do most of their surgeries at the same hospital of Rush in Chicago.

And as a result of all of this.

Our view is that actually Doctor Graf is a much higher quality and more efficient doctor.

And you may ask, well, wait, wait, hold on.

How could it be that that then Doctor Dewald has such a low cost per patient?

Well, the thing that really drives those legacy methodologies is just randomly who shows up into that doctor's office and how severe their back pain was.

So maybe Doctor Dewald had a bunch of patients who had one visit and whose back actually just started to feel better the next day, and all they had was an office visit.

Well, that's going to drag down Doctor Dewald's cost per patient.

And maybe Doctor Graf had a lot of patients that had some really severe issues that really need treating, and that's going to drive his up.

And there's no way to adjust for that in the data.

And so we think it's really critical if you're going to actually understand, care and manage costs to go bottoms up and measure everything about these doctors in this way to create higher quality and more efficient care.

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Before Garner, this employer had significant cost from low quality care. After Garner, this improved quickly due to members seeing Top Providers.



0
0
0
0
0

Members Seen				5

	...Who Had Surgery before PT			3

...Who Had their Surgery Inpatient			2

...Who Had Maximally Invasive Technique			3

...Who Had Complications After Surgery			2

...Who Had a Revision Surgery			2

Total paid claims				$172,415

Dr. Dewald
NPI: 1952334948

Dr. Graf
NPI: 1700981107

$69,160

Actual employer results before and with Garner

$0

$18,750

TOP PROVIDER

Total member responsibility

5

Comparison of 2 Chicago-area spine orthopedists

Before Garner

With Garner

Proprietary & confidential. Do not distribute.

21

{9.6.3 - 2025-01-26}

And then what we think is really cool is getting back to the case study of this actual client.

We were actually really able to change the performance of this health plan by simply shifting the volume.

So before garnering the year before Garner, we ran their claims data.

And the five members that that saw doctor dueled.

It turned out three of them had surgery before PT.

Two of them ended up having a revision.

There were significantly higher usage of fusions.

There were complications, inpatient surgeries and on and on.

And so this client spent $172,000 in paid claims on doctor dueled on those five patients.

And by the way, the members were stuck with $18,000 of bills again for that care.

And then the next year we also had five patients see Doctor Graf.

And the outcomes were so much better.

So no surgery before PT, no revisions, no overly invasive fusions, no complications, all outpatient and the total cost was less than $70,000.

And by the way, with the Garner program, those members ended up having their out-of-pocket covered entirely for this client.

So you can see a massive savings, a massive quality impact.

And this is sort of the essence of what we do here at the Garner program and why we think our methodology is really critical to our success.

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Data-driven steerage with proper incentivization delivers unmatched engagement and cost reduction

A NON-DISRUPTIVE SOLUTION WITH GAME-CHANGING BENEFITS

-12^%

lower plan cost PEPM

80^%

lower employee out-of-pocket

42^%

Members use Garner to find a doctor

For fully insured and self funded employers

Proprietary & confidential. Do not distribute.

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Thank You!

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Introduction to Employee Stock Ownership Plans (ESOPs)

Wells Fargo ESOP Advisory

Lee Palmer

Executive Director, Wells Fargo

National Head of ESOP Advisory

Confidential – For Discussion & General Information Purposes Only

The Introduction to ESOPs deck is for presentation to customers and or prospects that are considering an ESOP. The slides can also be used together or separately – as a slide library. These slides cover the basics of the leveraged ESOP when there is a need for a specific concept.

Know what the audience knows. Ask the Company’s attendees:

What do you already know about ESOPs? So we don’t duplicate efforts.
Have you worked with any ESOP professionals yet? The more knowledgeable the ESOP professional they have engaged with the deeper they may get with questions.
The flow of the deck is ESOP 101. So the knowledge builds from slide to slide.
However, another option is to follow the Company’s attendees train of thought. Use the ROC to skip to specific slides and then double check for missing concepts.

The overall goals of presenting ESOP 101 is (1) to establish that Wells Fargo has ESOP expertise and (2) to recommend an advisor for feasibility/implementation.

It’s personal style – but I would not lead with our capabilities. Establish your own credibility with some basic capabilities so that the audience understands where you are coming from. But make it quick, highlight important facts and be concise. They learn a bit during introductions so no need to repeat. Make reference to Wells Fargo’s ESOP capabilities at the back of the deck. Feel free to move to the front.

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ESOP basics

An ESOP is a tax-qualified employee retirement plan.

The ESOP operates much like the match in a 401(k) plan where:

Contributions are tax deductible by the sponsoring company
Employees are not taxed on contributions
Income earned by the ESOP trust is not taxed
Employees are taxed on distributions

Unlike other retirement plans, an ESOP:

Is designed to invest primarily in the employer’s stock
Can borrow from the sponsoring company

An ESOP is a vehicle for ownership transition

and an employee benefit

What is an Employee Stock Ownership Plan?

The ESOP can borrow to buy Company stock.

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The ESOP option

Business Owner – The sale to the ESOP provides the selling business owner diversification, liquidity, flexibility, and potentially a tax-advantaged sale.
Employees – The ESOP is a retirement plan that encourages employees to think like owners and is known to increase Company performance according to studies conducted by ESOP trade associations and various foundations.
Companies – There are several tax advantages for employers who sponsor ESOPs - leading to more cash available for debt service. ESOP ownership also allows for continuity of management and potentially, the corporate strategy.

ESOP Benefits: Business Owner, Employees & Companies

Employee Stock Ownership Plans (ESOPs) provide benefits for the owner, the employees, and the company.

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ESOP basics

Company contributes cash or pays a dividend (or an S distribution) on ESOP stock. ESOP uses cash to make ESOP Loan payments (back to the Company).
Company uses cash to pay the bank.
Stock is allocated to employee participant accounts in the ESOP trust.

Transaction Cash Flows

Company borrows from the bank (the “Bank Loan” or “External Loan”).
ESOP borrows from the Company (the “ESOP Loan” or “Internal Loan”).
ESOP uses the borrowed funds to purchase stock from the sellers.

Annual Transactions

Cash

Stock

ESOP Loan

Cash

ESOP

Shareholder

Company

Bank

Cash

Bank Loan

3

2

1

Stock is allocated

ESOP Loan�Payment

Contribution dividend

S distribution

ESOP

Employee Participant

Company

Bank

Bank Loan�Payment

3

2

1

The Leveraged ESOP

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Purposes an ESOP Can Serve

Employee benefit (studies have shown that ESOP companies tend to retain and attract talent in the competitive marketplace)
Ability to exit without selling to a competitor or third party
Flexible Buyer

Can buyout one owner or all owners

Transition ownership through partial or full sale
Ensures legacy of the company
Selling shareholders can retain roles in the company post-transaction

Same role, board of directors, etc.

Provide a tax-advantaged buyout/succession planning for business owners

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Beneficial versus Direct Ownership

Shares purchased by the ESOP are owned in a trust, not by plan participants

Eligible employees are “beneficiaries” of the trust

Trustee acts in a fiduciary capacity and is the legal owner of the shares
Trustee exercises shareholder rights in the best interest of the participants

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Which Companies Should Consider an ESOP?

Privately held businesses looking for a succession plan
Companies that recently went through a failed auction
Companies that need a competitive bid for a sale to a third party
Companies with partners who have different liquidity horizons
ESOP is a ready buyer at any time at fair market value
Over 30 employees
Stable performers where employees are a key asset

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The 0% to 100% S Corporation ESOP

ESOP Company transaction financing with enhanced cash flows

Subordinated to the senior lender No amortization, small cash interest	Mezzanine/Seller (Possible) 0.5x – 1.0x EBITDA

Private equity/debt co-invest Warrant package	Private Equity Seller

Sample senior secured financing Funds the seller’s cash at closing Liquidity needed for 1042 election	Senior (Possible) 2x to 3x EBITDA

Rollover of account balances (unusual) Substitute benefits Management equity	Other

Valuation Multiple 6.0x

Senior

2^nd Lien, Mezzanine

or Seller

PE/Seller

Existing Qualified �Plan

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Research results on employee-ownership

Conducted by trade associations, universities and other institutions interested in employee ownership

Improved performance: ESOP companies tend to have higher sales, employment, and sales per employee growth rates. They also have a higher likelihood of remaining in business for several years (NCEO & Ernst & Young).
Better retirement savings: ESOP companies have higher retirement contributions and balances for employees than companies with only a 401(k) plan (NCEO, ESCA, & Ernst & Young).
Better employee retention: ESOP companies have lower voluntary quit rates and are more effective at retaining and recruiting employees (ESCA).
Better job stability: Employee-owned companies have better job stability and security (The Aspen Institute).
Increased wealth-building opportunities: Employee-owners have more opportunities to build wealth (NCEO & Rutgers).
Greater say in the workplace: Employee-owners have more autonomy and a greater say in the workplace (The Aspen Institute).
Higher resiliency: ESOP companies are more resilient and productive during economic downturns, including the COVID-19 pandemic (NCEO, ESCA, & The Aspen Institute).
Improved international competitiveness: Employee-owned companies appear to have competitive advantages in international markets (NCEO & Rutgers).

ESOP Trade Associations

NCEO – National center for employee ownership goal is to help employee ownership thrive.

TEA – The ESOP Association educates about and advocates for employee ownership with an emphasis on ESOPs.

ESCA – Employee owned S corporations of America advocates exclusively for S Corporation ESOPs.

EOX – Works to expand employee ownership by creating and supporting non-profit state centers.

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Management incentive plans (MIPs) in ESOPs

General Considerations

S Corporation Design Issues

Terms and conditions of various options for MIPs in ESOP transactions

Actual Equity		Equity-based		Non-equity Incentives
Full Value	Appreciation Only	Full Value	Appreciation only	Non-equity Incentives
Restricted stock (stock settled)	Incentive stock options Nonqualified stock options	Phantom stock Restricted stock units (cash-settled)	Stock appreciation rights (SARs)	Deferred compensation Excess plans Long-term cash incentives

ESOP trustees are generally favorable with regards to the issuance of MIPs if they are reasonable in amount.
ESOPs financial advisor considers MIPs in fairness opinion.
Department of Labor generally accepts as reasonable, MIPs ranging from 10-20% of company shares outstanding. Board of Directors approves terms & recipients of MIPs.
MIPs can be awarded for tenure & performance or both.
Care should be taken to comply with IRC Section 409A.

MIPs in S Corporation ESOP are designed to avoid being classified as a second class of stock under the tax code.
MIPs are designed to comply with IRC Section 409(p).
Exercise designed as a cash transaction to avoid an income allocation to holder, a possible S election termination, & a tax distribution.
MIP documents should include provisions to avoid an IRC Section 409(p) violation.

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IRC Section 1042 – deferral of capital gains for C Corporations only

Requirements and comparison of 1042 benefits

Comparative example of net proceeds to the seller for an ESOP and non-ESOP sale
Assume the gross sales proceeds is $20 million. Selling shareholders tax basis in the S Corp stock increases with retained earnings – assume $15 million. Selling shareholders tax basis in the C Corp stock is nominal. Federal and state tax rates are as shown in the table below along with the Obama care tax. 1042 benefits for the sale of high basis S corporation shares to an ESOP are smaller.

Corporate Structure Sequences
C remains C
C becomes S
S remains S
S becomes C becomes S�( 5-year waiting period)

Computation of Net Proceeds
Comparison of non-ESOP, C Corp and S Corp sale
	Non-ESOP Sale	C Corp Sale to ESOP 1042 Election	High Basis S Corp
Gross Sales proceeds	$20,000	$20,000	$20,000
Tax Basis	-	-	($15,000)
Capital Gain Realized	$20,000	$20,000	$5,000
Federal Capital Gains Tax (20%)	($4,000)	-	($1,000)
Obama Care (2.8%)	($560)	-	($140)
State Tax Rate (6%)	($1,200)	-	($300)
Net Sales Proceeds	$14,240	$20,000	$18,560¹

¹Tax basis in S Corporation increases with undistributed profits. Net sales proceeds = gross sales proceeds less taxes on the sale.

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A simple comparison to a third-party sale

Does an ESOP meet the owner’s objectives?

Objective	Sale to Third-Party	Sale to ESOP
Maximize Value	FMV determined by market	FMV negotiated with Trustee
Taxation of Gain ⁽¹⁾ (Federal & State)	~ 25 – 35%	~ 0-25%
Liquidity & Payout	Upfront plus contingent	Upfront plus fixed & contingent
Payout Time Period	3-5 years	Up to 10 years Carried interest 20-25%
Predictability	Unpredictable	Predictable
Flexibility	Less Flexible	More Flexible
Likelihood of Close	Unknown	~ 100%
Disruption to Operations	Material (Buyer access to employees & customers)	Minimal (Specialized Deal Team)
Due Diligence Process	Multiple buyers, detailed	One buyer, streamlined
Escrows, Reps & Warranties	Onerous	Less contentious, straightforward negotiation
Employee/Management Impact	Unknown - possibly negative Management changes	Positive Retains Management
Post-Close Involvement	Buyer’s discretion	Flexible
Does Plan Meet Objectives?	TBD	TBD

35

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ESOP myths

General misconceptions about ESOPs

Myth
Sounds too good to �be true
Sensitive information will be disclosed
Employees do not have the funds
Participants will vote on all matters
Owners may get a higher price selling to a third party

Myth Debunked
ESOPs have been around for almost 50 years. There has been support for the ESOP tax benefits in Congress from both sides of the house. There are many successful ESOP owned companies.
The required disclosures under ERISA are the components of the participant statements - number of shares and the per share value.
The Company funds the ESOP’s purchase of stock. It is rare to have the employees give up compensation or invest personal funds.
The participants may vote on major issues: sale of all or substantially all the corporate assets, merger, dissolution, liquidation and reorganization (similar to public company shareholders).
The ESOP can pay fair market value under ERISA. The fair market value can be a control price if the ESOP ends up with control.

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Benefits Reimagined

AMIP Cincinnati

July 10,2025

Presented By:

Kathleen Monahan & Joseph D’Alconzo of Alliant Insurance Services, Inc.

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AlliantRetirementConsulting.com | For Informational Purposes Only. Not intended as Legal or Tax advice. Advisory Services offered through Alliant Retirement Consulting, a federally Registered Investment Advisor.

401(k)/403(b) Employer Match or Profit Sharing Contributions Reimagined

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Match Formulas

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Advisory Services offered through Alliant Retirement Consulting, a federally Registered Investment Advisor.

3

Discretionary Match

Employer’s discretion
Best practice is to notify employees 30 days in advance what the match will be to allow employees to adjust salary deferral election
Can me modified at any time
Must elect in Adoption Agreement to calculate & post on a per pay or annual basis

Safe Harbor Non-Elective Contribution (SHNEC)

Mandatory Employer Contribution
Minimum of 3% of Eligible Compensation
Posted annually
All eligible employees receives regardless if the person is making personal salary deferral contribution

Safe Harbor Match Contribution (SHMatch)

Mandatory Employer Match
100% on first 3%, 50% on next 2%
100% Vested
Posted on a per pay basis

Safe Harbor Enhanced Match Contribution

Mandatory Employer Match
100% on the first 4% (can be up to 6%)
100% Vested
Posted on a per pay basis

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Reimagine Different Match Models

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Simple Stretch Match:

50% of first 6% of employee contribution
25% of first 4% of employee contribution
30% of first 9% of employee contribution

Simple Traditional Match:

100% of employee contribution
100 of first 3% of employee contribution

Tiered Match:

100% of first 3% + 50% of the next 2% of employee contribution (4.5% match)
25% of first 4% + 100% of the next 5% of employee contribution (6% match)
50% of first 2% + 75% of the next 3% + 100% of the next 2% of employee

contribution (4.5% match)

Multiple Formulas:

Employer matches employee contributions on a “per dollar” basis up to a fixed

amount

Similar to what DRL has today
100% match up to $6,000 maximum

Fixed Dollar:

If you defer 6% of salary, you will receive $3,000 match
If you defer $3,000, you will receive $3,000 match

AlliantRetirementConsulting.com | For Informational Purposes Only. Not intended as Legal or Tax advice. Advisory Services offered through Alliant Retirement Consulting, a federally Registered Investment Advisor.

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Reimagine Different Match Models

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Match Based on Service:

0 to 5 years of service:
6 to 10 years of service:
Over 10 years of service:

AlliantRetirementConsulting.com | For Informational Purposes Only. Not intended as Legal or Tax advice. Advisory Services offered through Alliant Retirement Consulting, a federally Registered Investment Advisor.

50% of first 6% of employee contribution 75% of first 6% of employee contribution 100% of first 6% of employee contribution

Match Based on Employee Groups

Machinist:
Engineers:
Officers:

100% of first 6% of employee contribution 75% of first 6% of employee contribution 50% of first 6% of employee contribution

Match with a Cap

100% of first 6% of employee contribution, no cap
75% of first 6% of employee contribution, cap of $7,500
50% of first 6% of employee contribution, cap of $5,000

All the above, plus any type of discretionary matching contribution is subject to Average Contribution Percentage (ACP) testing. Must be a fair formula to prevent Highly Compensated Employees (HCE) and Owners from receiving a greater benefit than the Non-highly Compensated Employees (NHCE)

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Profit Sharing Allocations

AlliantRetirementConsulting.com | For Informational Purposes Only. Not intended as Legal or Tax advice.

Advisory Services offered through Alliant Retirement Consulting, a federally Registered Investment Advisor.

Pro-Rata Allocation

Allocated as a % of eligible compensation

Fixed Amount Allocation

Everyone receives the same dollar amount

Permitted Disparity

Integrated formula for employees earning above the Social

Security wage base

$176,100 is Social Security wage base for 2025
Receives an additional % (7.5% is common) of Profit Share on earnings between Social Security wage base to IRC Section 401(a)(17) compensation
$350,000 is the 2025 IRC Section 401(a)(17) limit

Employee Groups aka New Comparability

Group employees by

Position
Job Title
Officer Title
Every employee in their own group

Groups receive a different % of Profit Share
Must pass Gateway Testing

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Non-Qualified Plans aka Top-Hat Plan

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Non-Qualified Deferred Compensation (NQDC) Plans

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83% of Fortune 500 companies offer nonqualified deferred compensation plans.¹Here are three reasons why:

Attract talent

~90% of employers offer a NQ plan to have a more competitive benefits package²

Retain employees

~ 83% of employers offer a NQ plan to engage and retain talent²

Reward employees

> 43% of employers offer a NQ plan to help eligible employees accumulate assets²

¹Private Pensions: IRS and DOL Should Strengthen Oversight of Executive Retirement Plans, US Government Accountability Office, 2020

²2022 Non-Qualified Plan Survey, Plan Sponsor Council of America, 2022

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NQDC Plans Allow for Various Types of Deferrals

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Funding Vehicles

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Employer Stock Option Plans (ESOP)

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$400K

Tax savings

No

taxes

Company:

$1M taxable income

Distributes $400K dividend to owner (40% of $1M)

Owner

Owner pays $400K to IRS for taxes

After ESOP (company 100% ESOP owned)

Company:

$1M taxable income

Distributes $0

100%

ESOP

owned

Why consider an ESOP?

Reduce tax liability

Before ESOP

IRS and state

This example is for illustrative purposes only.

For financial professional and plan sponsor use only PQ11065-08 | 863573-062019 | 06/2021

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Employer Stock Option Plans (ESOP)

Getting started

What firms are good candidates?

Firms of all shapes and sizes. Over 6,000 firms in the U.S. have over 10.5 million employee owners today.^*

AlliantRetirementConsulting.com | For Informational Purposes Only. Not intended as Legal or Tax advice. Advisory Services offered through Alliant Retirement Consulting, a federally Registered Investment Advisor.

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Closely held corporation (Chapter C or S)

History of profitability and strong cash flows

Employee- centered culture

*The ESOP Association, June 2021.

For financial professional and plan sponsor use only PQ11065-08 | 863573-062019 | 06/2021

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Questions

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Q & A�(All Speakers)

Opening doors in manufacturing

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OPTIONAL TOUR OF CBT COMPANY

10.30 – 11.00

THERE’S NOTHING STANDARD ABOUT CBT SERVICE

OUR MISSION

At CBT, our mission is to be recognized as the best business partner for our customers, our suppliers, our CBT families, and the communities we serve.