1. 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 06-2013

2. Positioning Premium Only Plans to the Employee By the end of this lesson you will be able to: Understand the benefits and tradeoffs of POP to an employee Communicate the concept of pretaxing Demonstrate how to apply what you learned during your conversation with the employee Lesson Objectives

3. Positioning Premium Only Plans to the Employee Flexible Benefits Plan Overview Flexible Benefit Plans POP Premium Only Plans POP Premium Only Plans FSA Flexible Spending Accounts FSA Flexible Spending Accounts DFSA Dependent Flexible Spending Accounts DFSA Dependent Flexible Spending Accounts HSA Health Savings Accounts HSA Health Savings Accounts HRA Health Reimbursement Arrangement HRA Health Reimbursement Arrangement

4. Positioning Premium Only Plans to the Employee Tailor benefits to their individual needs. Reduces their Federal, State, & FICA taxes. Tax savings! Increased spendable income. Employee Benefits Employee Trade-offs Locked into plan for one year. Irrevocability of elections. Possible reduction in Social Security benefits.

5. Positioning Premium Only Plans to the Employee Payroll Taxes Communicating the Concept of Pretaxing 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

6. Positioning Premium Only Plans to the Employee $1,000 example Communicating the Concept of Pretaxing Without POPWith POP Salary (Gross Pay based on 24 pay periods) $1,000 Taxes-$250- Insurance--$100 $750$900 Taxes--$225 Insurance-$100- Spendable Income$650$675 +$25 This is a sample table for example purposes only. Taxes may vary by state.

7. Positioning Premium Only Plans to the Employee What could an employee do with an additional $25 per pay period in their take home pay? Benefits to the Employee More money in paycheck Keep it in their take home pay Pick up or increase core benefits Add to their holiday fund And add additional protection for themselves and their family by picking up one of our plans.

8. Positioning Premium Only Plans to the Employee Must be an “employee” of the employer Employer determines employee eligibility – Waiting period for benefits – Full time status Plan documents list employee eligibility requirements Tradeoff: Employee Eligibility

9. Examples of qualifying events: Change in marital status Change in dependent status Termination or commencement of the employee’s or spouse’s employment A change in employment status Unpaid leave of absence by the employee or the employee’s spouse A significant change in health coverage Addition or elimination of a benefit option Significant cost changes to benefits Positioning Premium Only Plans to the Employee Tradeoff: Change in Status

10. Positioning Premium Only Plans to the Employee Tradeoff: Change in Status EXAMPLE: Adding the baby to Mary’s health insurance coverage would be considered a qualified status change and would be allowed during the plan year. Mary could NOT add Mike to her plan mid-year, unless for example he loses his job and no longer has coverage.

11. Positioning Premium Only Plans to the Employee Tradeoff: Consequences of Pretaxing Reductions in employees’ taxable incomes as a result of pre-taxing benefits lower the amount of FICA withheld from their paychecks and the contributions made to the Social Security programs for retirement, disability, and survivor benefits. Therefore, there may be a minor reduction in future Social Security benefits. Retirement Benefits If disability premiums are employer-provided or paid with pretax dollars, any disability claim payments received by the employee will be considered income and are taxable. Disability Benefits We are required by the IRS to provide a Form 1099 when indemnity payments of $600 or more are made in a year. However, the full indemnity payment may not be taxable. Indemnity Benefits

12. Positioning Premium Only Plans to the Employee Group meetings can be used to inform the employees about the benefits Why Offer a POP? POP provides you the opportunity to see all eligible employees for better working conditions Pretaxing increases an employees spendable income

13. Mr. Bob Jones owns an architecture firm with 20 employees. Mr. Jones would like to you meet with each employee in a 1-to-1 benefits counseling session. During a 1-to-1 session you meet Jenny, the receptionist. You explain that she can have tax savings through pretaxing. Jenny is not familiar with the advantages of pretaxing. How would you explain the pros and cons of pretaxing to Jenny? to Protect My Business Scenario Question Positioning Premium Only Plans to the Employee

14. Position Premium Only Plans to Jenny… Positioning Premium Only Plans to the Employee You can use your additional take-home pay for a number of things. You can pick up new core benefits, add it to your holiday savings fund, keep it in your paycheck, or add additional protection for Jenny and her family through one of our plans. Make sure Jenny understands that she cannot make changes to her benefit elections mid-year unless she has a qualified status change. Make sure Jenny understands that any disability payments received will be considered taxable income. And, if she receives any indemnity benefits she may receive a 1099 under certain circumstances.

15. Position Premium Only Plans to Jenny… Positioning Premium Only Plans to the Employee Is Jenny ready to move forward with pretaxing a Premium Only Plan? YES! Explain Jenny’s options in simple, straight forward terms. Help figure out which areas make sense, determine the right amounts and assist in filling out paperwork. YES! Explain Jenny’s options in simple, straight forward terms. Help figure out which areas make sense, determine the right amounts and assist in filling out paperwork.

16. Positioning Premium Only Plans to the Employee Flexible Benefits Plans Tools Marketing > Get Working Conditions > Flexible Benefits Plans > Support Materials – Flex Plan Supplemental Form – Flex Plan Supplemental Form User Guide – AmeriFlex POP Implementation Guide – ePOP Document Ordering Webinar – Flexible Benefits Plans FAQs – Flexible Benefits Topic Sheet (Employer) – Flexible Benefits Employee Flyers

17. Positioning Premium Only Plans to the Employee 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.

18. Positioning Premium Only Plans to the Employee 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. Share your feedback by sending an email to CLAInstructionalDesigners@coloniallife.com. Congratulations! You’ve successfully completed Lesson 3: Positioning POP to the Employee