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contributions for employee benefits, while allowing them to
accumulate wealth through the appreciation of assets purchased by
the plan with their contributions. The Prime Plan had some
similarities to a defined benefit pension plan, but the Prime
Plan had fewer limitations on funding, benefits, and
accessibility to funds.
Prime marketed the Prime Plan primarily to highly
compensated small business owners with five to six employees.
These business owners could expect to receive the following
benefits from the Prime Plan, as the plan was advertised to them:
1. The employer would currently deduct a one-time
contribution that it made to the Prime Plan to fund DWB's and
death benefits, and the contribution would not be taxable to the
employer's employees until received as benefits;
2. The employer could contribute to pension plans, as well
as to the Prime Plan, but, in the case of the Prime Plan, the
employer would not be subject to the rules limiting contributions
to pension plans;
3. Contributions to the Prime Plan would earn income
tax-free because the Trust, although not a tax-exempt entity,
would invest each employer's contributions in life insurance and
municipal bonds;
4. The employee/owners could reap personally most of the
benefits offered by the Prime Plan by basing an employee's
receipt of benefits on compensation and by using vesting
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Last modified: May 25, 2011