Executive Compensation Benefits. Incentive Bonus Plans ..

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• David Foster, JD, CLU, ChFC
• Presenting
• The Changing Landscape of Qualified
  andNon-qualified Retirement Plans
  

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Alphas New Services Financial Services

• Executive Compensation / Benefits
• Incentive Bonus Plans
• Deferred Compensation Programs
• Supplemental Disability / Life Insurance
• Wealth Management Resources
• Employee Financial Planning
• Lunch Learn educational seminars
• Individual employee financial consulting
• Retirement and college education savings
  projections
  

• Executive Long Term Care Programs
• Phantom Stock, Stock Options Stock
  Appreciation Rights
  

• Retirement and college education
  savings projections
  

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Alphas New Services Financial Services

• Estate Planning
• Estate Tax Planning
• Asset Protection
• Trust Planning
• Business Succession Planning
• Buy-Sell Agreements
• Exit Planning Strategies
• Management Buy-Out Arrangements

• Planning for Children With Special
  Needs
  
• Planned Giving Alternatives

• Employee Stock Ownership Plans
• Family Business Continuation

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Alphas New Services Financial Services

• Qualified Retirement Plans
• Defined Contribution Plans 401(k), 403(b),
  Profit Sharing, SIMPLE Plans, ESOPs
  
• Defined Benefit Plans Pension Plans, 412(i)
  Plans
  
• Products
• Mutual Funds
• Annuities
• Managed Investment Accounts
• Life Insurance
• Disability Insurance
• Long Term Care

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Alphas New Services Total Retirement Solutions

• Employees rely on employer sponsored retirement
  plans to meet their retirement goals. We can
  help by
  
• Designing and implementing effective,
  cost-efficient qualified retirement plans
  
• Analyzing plan level administrative services and
  costs
  
• Providing employee educational seminars

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Alphas New Services Total Retirement Solutions

• Highly compensated executives may be limited in
  the amount they can contribute to qualified
  retirement plans. We can help by
  
• Designing and implementing nonqualified executive
  retirement / benefit plans
  
• Reviewing current plans to assure compliance with
  recent legislation
  
• Providing turnkey programs that reduce human
  resource time commitment
  

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Alphas New Services Total Retirement Solutions

• We provide individual employees with the tools
  and education they need to meet their retirement
  goals. We can help by
  
• Establish goals and review current savings plan
• Provide retirement needs calculations
• Develop strategies to reach their retirement
  goals
  
• Educational lunch learn seminars

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Alphas New Services Total Retirement Solutions

• Employees who terminate their employment will
  have to make decisions regarding their retirement
  plan. We can help by
  
• Exploring the many, and sometimes complex,
  alternatives
  
• Helping them avoid triggering substantial income
  tax
  
• Helping them allocate investments based on
  lifetime changes
  

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Pension Protection Act of 2006 - PPA

• Background
• Effective dates
• Provisions

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Pension Protection Act of 2006 PPABackground

• Defined Benefit funding concerns strain pension
  system
  
• American workers not saving enough for
  retirement
  
• Signed into law by President Bush on August 17,
  2006
  
• Various effective dates

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Pension Protection Act of 2006 PPAEffective
Dates

• Various effective dates
• EGTRRA permanence (immediate)
• Automatic enrollment changes (immediate and
  2008)
  
• Vesting changes (2007)
• Investment advice (2007)
• DB(k) Plan combination of best of defined
  benefit and 401(k) in one plan (2010)
  
• Other changes (highlights)

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Todays Focus 401(k) Changes
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Todays Focus 401(k) ChangesEGTRRA Permanency
Growth Opportunities

• Makes permanent higher contribution limits for
  401(k)s and IRAs, enabling more workers to build
  larger retirement nest eggs
  
• Increased Deferral Limits
• Catch-up Contributions
• Increased 415 Limits
• Savers Credit
• After-Tax Contribution Rollovers
• Direct Rollovers to Roth IRAs
• Roth(k) Contributions

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Todays Focus 401(k) ChangesAutomatic
Enrollment

• Removes barriers that prevent companies from
  automatically enrolling employees in 401(k)
  plans
  
• State law preemption (effective immediately)
• Corrective distributions (2008)
• Default Investments (TBD)
• Refunds within 6 months (vs. current 2 ½ months
• Automatic Enrollment Safe Harbor (2008)

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Todays Focus 401(k) Changes Faster Vesting

• Effective 2007
• Current Law
• Employer other contributions
• 5 year cliff vesting
• 7 year graded
• Employer matching contributions
• 3 year cliff vesting
• 6 year graded
• PPA All employer contributions
• 3 year cliff vesting
• 6 year graded

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Todays Focus 401(k) Changes DB/DC Combined
Plan Deduction Limit

• Current law Combined plan (DB/DC) deduction
  limit is 25 of pay, or DB funding minimum
  
• 2006/2007 for DC plan purposes contribute up
  to 6 of pay in DC plan irregardless of the DB
  plan
  
• Starting in 2008 The DB/DC combined plan
  deduction limit is eliminated

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Todays Focus 401(k) Changes Participant
Account Statements

• Ensuring workers have more information about the
  performance of accounts. Requirements
  
• Participants with control Quarterly Statements
• Participants without control Annually
• Explanation of diversification importance
• Risk statement if 20 of portfolio from single
  investment
  
• Department of Labor (DOL) is to issue
  regulations
  
• Effective 2007

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Todays Focus 401(k) ChangesProfessional
Investment Advice

• Provide a prohibited transaction exemption for
  advice from a fiduciary advisor to a DC plan
  participant under an eligible investment advice
  arrangement
• Fiduciary advisor
• Eligible investment arrangement
• Effective in 2007

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Todays Focus 401(k) ChangesOther Provisions
- COLI

• Tax trap for corporate owned life insurance
• Notice and consent requirement
• Exceptions based on insureds status
• IRS information reporting requirement

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American Jobs Creation Act of 2004

• New Rules for Non-qualified Deferred Compensation
  Plans
  
• Consequences of Non-compliance

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409A

• Broad definition of deferred compensation
• Limitations on what may trigger payment
• Rules for when the election to defer must be
  made
  
• Rules on re-deferrals
• Prohibits acceleration of payments

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Non-Compliance

• Compensation subject to immediate taxation
• Interest at IRS rates plus 1
• 20 penalty on amount that should have been
  included as taxable income

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Due Diligence

• Review current executive compensation
  arrangements, including individual employment
  contracts
  
• Work with advisors to make sure compensation
  agreements are in compliance with 409a.

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Additional Updates

• PA Taxation of Non-qualified Deferred
  Compensation
  
• Split Dollar Regulations
• Tax Treatment of Long Term Care Insurance
• Life Insurance Product Improvements
• Viatical Settlements

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• Todd Hons
• Presenting
• Medical Carrier Updates

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Trends

• Medical Rates
• Lower Renewals!

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• New PPO Plan designs available with different
  deductibles and co-insurance amounts
  
• BlueCross will be renaming most of their products
  starting January 1, 2007
  
• Ex. Twin 250 will be 250/100
• Deductible will be combined for in/out of
  network
  

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• In addition to the March 1, 2006 Rx changes,
  BlueCross added 3 more plan available October 1,
  2006
  

No ancillary charge when provider writes
Dispense as written
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• Benefit ChangesEffective January 1, 2007 or upon
  renewal for groups 2-104Effective February 1,
  2007 or upon renewal for groups 105
  

• KHP HMO removing Nicotine Cessation Program
  (NCP)
  
• All plans A co-pay will apply to therapies in a
  home health setting, currently there is no
  co-pay
  
• Vision Therapy All plans a co-pay will apply
  and will fall under physical medicine, currently
  no co-pay
  
• Bony Impacted Teeth All plans will NOT be
  covered, currently covered under medical plan
  

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• Benefit ChangesDeductible Credit and Deductible
  Pro-ration(effective and renewal date, other
  than January 1)
  

• If a group moves to a higher deductible, member
  will receive credit for the portion of deductible
  already met
  
• If a group is new to CBC or moving from a 0
  deductible plan, members will receive a prorated
  deductible
  
• First quarter no pro-ration
• Second quarter member will be responsible for
  75 of deductible chosen
  
• Third quarter member will be responsible for
  50 of deductible chosen
  
• Fourth quarter member will be
• responsible for 25 of deductible chosen

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• CBC requires medical underwriting for groups size
  2-19 enrolling
  
• CBC requires 75 participation after spousal
  waivers to any carrier, still requires a minimum
  of 50 to enroll
  

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• ePlatform available
• Requirements
• Standard plan design (approved)
• Online enrollment
• Receive bills online
• Receive enrollment materials online
• If requirements are met, a 1.5 rate reduction is
  received
  

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• Dual options must be approved by Highmark
• Groups with over 50 enrollees 75 participation
  required with spousal waivers from any carrier
  
• Groups 2-50 enrollees 75 participation
  required, will accept spousal waivers from
  Highmark and any other Blue plans outside of
  their 21 counties (not CBC or KHP)

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• Chamber Choice -

• Exclusive to Highmark
• Chamber Plan available for
• Berwick, Columbia, Waynesborough, Shippensburg,
  Schuylkill, and Chambersburg Chamber of Commerce
  
• Main Advantages
• Discounted rates
• 15,000 term life insurance included at no
  additional cost
  
• Must be a standard, approved plan design
• Can be marketed through Alpha Benefits

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• Forced Plan Changes
• Higher specialist co-pays
• Higher emergency room co-pays
• Increased lifetime maximums
• Rx changes higher brand formulary and brand
  non-formulary co-pays
  

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• Select Rx Option
• Automatically included with PPO Plans
• Option for POS plans with 50 enrolled
  (approximate 1 increase in premium cost)
  
• Select Rx takes away prior authorization for some
  commonly used prescriptions
  
• Example Acid reflux medications
• Total list includes 22 medications

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• Gettysburg Hospital back in the network
• New EOBs Explanation of Benefits
• Lehigh Select Products
• Available to groups in Lehigh, Carbon,
  Northampton counties
  
• Plan includes competitive rates and benefit
  incentive to use Lehigh Valley Hospital
  

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• Offers fully insured products
• Medical underwriting for all products
• Working on competitive pricing
• Accesses Highmark Blue Shield statewide doctor
  network
  

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Carrier Updates Aetna

• York Hospital (Wellspan) recently joined network
• Lancaster General in network
• New Plan designs with deductible and
  co-insurance
  

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Carrier Updates United Healthcare

• Still building doctor and hospital network
• Full array of PPO products
• National capabilities

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• Rxs Coming Off PatentOver the next 12-18
  months approximately 70 prescription drugs will
  be coming off patent
  
• Here are some of the most popular
• 2006 Zocor, Pravachal, Zoloft, Ambien
• 2007 Norvasc, Imitrex, Plavix, Zyrtec

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Plan Year vs. Calendar Year Deductibles
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• If someone is over age 65 and still working
  full-time, they are NOT eligible for Medicare
  Part D
  

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• Dates for providing Disclosure Notice to CMS
• Plan years ending in 2006 March 31, 2006
• Plan years ending in 2007 and beyond Within 60
  days after the beginning of the plan year (ex.
  Plan begins 1/1/2007, deadline is 3/2/2007)
  
• Within 30 days of terminating a plan that
  provides prescription drug benefits
  
• Within 30 days of a change in the creditable
  coverage status of a plan that provides
  prescription drug coverage
  

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• Dates for providing a creditable coverage notice
  to employees/retirees
  
• By November 15th of each year, starting in 2005
• Prior to an individuals initial enrollment
  period
  
• Prior to the effective date of coverage for any
  Medicare-eligible individual that joins your
  groups plan
  
• When the plan you sponsor terminates
• When the plan you sponsor changes its
  prescription drug coverage so that it is no
  longer creditable or becomes creditable
  
• Upon an individuals request

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High Deductible Update

• Medical Expense Reimbursement Plan (MERP Plan)
• Deductibles increasing
• 100 Groups In-force
• Health Savings Accounts
• Starting to make financial sense