The information contained in this training is confidential and intended for the training and education of Colonial Life & Accident Insurance Company and The Paul Revere Life Insurance Company employees and sales representatives (insurance producers in WA) only. Any other use of this information is not authorized. Do not give or show it to prospective insureds, employers of prospective insureds, other insurance carrier representatives, worksite marketing competitors, or anyone else not employed by or contracted with Colonial Life & Accident Insurance Company, The Paul Revere Life Insurance Company or other Unum Group business units. Lesson 2: Positioning Premium Only Plans to the Employer Lesson 3: Positioning Premium Only Plans to the Employee Lesson 1: Introduction to FBP with a focus on Premium Only Plans Basic Flexible Benefits Plans (FBP) The Basic Flexible Benefits Plans training modules consists of three lessons. Each lesson can be found on Propr. Version 05/2013

Positioning Premium Only Plans to the Employer By the end of this lesson you will be able to: Communicate the concept of pre-taxing Understand the trade-offs of Section 125 Determine how we can help an employer manage costs through tax savings Determine how to set up a new Premium Only Plan or amend an existing Premium Only Plan Demonstrate how to apply what you learned during your conversation with the employer Lesson Objectives

Positioning Premium Only Plans to the Employer We specialize in providing voluntary employee benefits, benefits communication and education options, including enrollment in Premium Only Plans. We provide streamlined communication and enrollment procedures. We can provide Premium Only Plans at no charge to qualified accounts. We provide all Premium Only Plan enrollment materials. Our Market Advantage Please see the “Know your Competition” training for more information.

Positioning Premium Only Plans to the Employer Flexible Benefits Plan Overview

Positioning Premium Only Plans to the Employer Enhances their current benefits program. More affordable benefits for their employees. Reduces their payroll taxes. Tax savings! Employer Benefits Potential cost considerations Implementing payroll deductions Eligibility Employer Trade-offs

Positioning Premium Only Plans to the Employer Communicating the Concept of Pre-taxing Payroll Taxes – What taxes are taken out for the employer and employee EmployerEmployee FICA 7.65% Federal Income Tax Varies by Employee State Income Tax Varies by State and Employee FUTA Varies by Employer SUTA Varies by State

Positioning Premium Only Plans to the Employer Communicating the Concept of Pre-taxing Benefiting the Employer Employee’s Insurance Cost (deducted from payroll), pretax Months Employee’s Payroll Deduction per Year Employer FICA Taxes Estimated Annual Employer Savings per Employee $500 x12 $6,000 X 7.65% $459 Company SizeEstimated Tax Savings 5 Employees$2, Employees$4, Employees$6, Employees$9, Employees$16, Employees$22,950 For illustrative purposes only — actual costs and savings may vary. Not a One Time Savings!

Positioning Premium Only Plans to the Employer Communicating the Concept of Pre-taxing Benefiting the Employer Without POPWith POP Annual payroll$500,000 Pretax Benefits$0$150,000 Taxable Payroll$500,000$350, % FICA$38,250$26,775 Savings$0$11, Employees $500 for Benefits $500 x 25 = $150,000 Savings to the employer! This is a sample table for example purposes only using 2011 South Carolina Tax Tables. Taxes may vary by state.

Without a POPWith a POP Salary (Gross Pay based on 24 pay periods) $1,000 Taxes-$ Insurance--$180 $823.29$820 Taxes--$ Insurance-$180- Spendable Income$643.29$ Positioning Premium Only Plans to the Employer Communicating the Concept of Pre-taxing Benefiting the Employee +$44.37 This is a sample table for example purposes only using 2011 South Carolina Tax Tables. Taxes may vary by state.

Positioning Premium Only Plans to the Employer Who is Eligible? Sole Proprietorship Owners Spouses & Legal Dependents (not employees) Spouses & Legal Dependents (if employees) All Employees Partnership All Partners Spouses & Legal Dependents (not employees) Spouses & Legal Dependents (if employees) All Employees Self-employed and 1099 Self- employed/1099 Employee

Positioning Premium Only Plans to the Employer Who is Eligible? Subchapter-S Corporations 2% or More for Stockholders, Spouse, Legal Dependents, and Owners All Employees Corporation Shareholders (if employees) All Employees Spouses & Legal Dependents (if employees) LLC Members/ Owners Employees

Positioning Premium Only Plans to the Employer Reviewing the plan documents. Conducting initial and annual enrollments. Ensuring that benefits offered under the plan qualify. Determining whether election changes are permissible. Performing nondiscrimination testing required by the IRC. Filing an annual Form 5500 return for each qualified benefit under the POP, as needed. Retaining documentation relating to plan operations. Employer Responsibilities for POPs An employer should always consult their attorney or tax advisor for specific questions.

Positioning Premium Only Plans to the Employer Filling out and submitting the Flex Supplemental Form. Filling out and submitting the AmeriFlex Online Application. AmeriFlex ePOP link Notifying employees of upcoming enrollment. Delivering and reviewing the plan documents with the employer. Reviewing the employer’s responsibilities. Preparing all materials needed for the enrollment. Sales Rep Responsibilities for POPs Coming Up Next

Positioning Premium Only Plans to the Employer The employer is provided with: a Plan Document an Adoption Resolution Agreement a Summary Plan Description Non-discrimination testing a POP enrollment form We will assist the employer with: Informing all eligible employees. Furnishing a copy of the Summary Plan Description to all eligible employees. We will do this all at NO CHARGE!* $1,800 in annual premium required. POP Support Through AmeriFlex *For qualified accounts.

Positioning Premium Only Plans to the Employer First, do they already pre tax their benefits and have a POP in place? If No, complete these steps: Setting Up a POP with AmeriFlex Flex Plan Supplemental Form (See user guide on Propr for information on each point in the form). Submit to Account Services with the other New Account Paperwork. Step 1 Order the Plan Document from AmeriFlex.* Once you complete the online application, plan documents and further instructions will be sent to the designated address. Step 2 * Webinar available for step-by-step instructions

Dr. Emmett Brown opened a pediatric practice three years ago and now has 14 employees. He offers health insurance to his employees on a post tax basis. He is interested in learning more about what Premium Only Plans entail. How would you explain the pros and cons of Premium Only Plans to Dr. Brown? to Protect My Business Scenario Question Positioning Premium Only Plans to the Employer

Position Premium Only Plans to Dr. Brown… Positioning Premium Only Plans to the Employer Show Dr. Brown the example on the POP Employer Topic Sheet. Explain to Dr. Brown he and his family (unless employees) cannot pretax under IRS code because he is the sole proprietor of the practice. Ensure Dr. Brown understands his responsibilities to administer a POP plan. Ask him if he has an attorney or tax consultant to help him with his POP plan administration. Explain to Dr. Brown our relationship with AmeriFlex, and that we will pay for the administration of the POP requirements only if we receive a minimum of $1,800 in annual premium. Walk through the follow services AmeriFlex offers employers:  Plan Document  Adoption Resolution Agreement  Summary Plan Description  POP Enrollment Forms for products that are not ours  Non-discrimination Testing

Position Premium Only Plans to Dr. Brown… Positioning Premium Only Plans to the Employer Is Dr. Brown ready to move forward with a Premium Only Plan? YES! Review and complete the Flex Plan Supplemental Form and AmeriFlex’s ePOP data requirements with him. YES! Review and complete the Flex Plan Supplemental Form and AmeriFlex’s ePOP data requirements with him.

Dr. Jean Williams opened a pediatric practice three years ago and now has 14 employees. She offers health insurance to her employees on a pretax basis with a Premium Only Plan administrator other than AmeriFlex. How much does Dr. Williams pay to her POP administrator? to Protect My Business Scenario Question Positioning Premium Only Plans to the Employer

Position Premium Only Plans to Dr. Williams… Positioning Premium Only Plans to the Employer Explain to Dr. Williams that because of our relationship with Ameriflex, we will pay for the administration of the POP requirements if we receive a minimum of $1,800 in annual premium. Walk through the follow services AmeriFlex offers employers:  Plan Document  Adoption Resolution Agreement  Summary Plan Description  POP Enrollment Forms for products that are not ours  Non-discrimination Testing

Position Premium Only Plans to Dr. Williams… Positioning Premium Only Plans to the Employer Is Dr. Williams ready to move forward with a Premium Only Plan? YES! Review and complete the Flex Plan Supplemental Form and AmeriFlex’s ePOP data requirements with her. YES! Review and complete the Flex Plan Supplemental Form and AmeriFlex’s ePOP data requirements with her.

Positioning Premium Only Plans to the Employer Premium Only Plan Tools Get Working Conditions > Flexible Benefits Plans > Support Materials – FPSF User Guide – AmeriFlex Implementation Guide – ePOP Ordering Webinar – Employer Topic Sheet – AmeriFlex Data Requirements Form

Positioning Premium Only Plans to the Employer Effective immediately, employers that offer FSAs that don't include a grace period will have the option of allowing employees to roll over up to $500 of unused funds at the end of this plan year. Additionally, this optional adoption: Does not reduce the $2,500 limit on annual salary reduction; Must be uniformly applied (for example, if capped at less than $500); Is in lieu of a grace period.

Positioning Premium Only Plans to the Employer If this lesson has been helpful to you, please refer to Propr to take the other lessons in this Basic Flexible Benefits Training Tutorial. We welcome your comments and ideas, and would like to know what you think. us at Congratulations! You’ve successfully completed Lesson 2: Positioning POP to the Employer