Baltimore, MD

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Qualified Sick Pay Plan Presentation

• Baltimore, MD
• 6/29/04
• Presented by
• Michael J. Kelly, CHU, RHU

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Welcome

• Purpose Desired Outcome
• Market Potential
• Existing Clients
• Opportunity To Improve Bottom Line

3
Identify Prospects / Problem

• Typical Scenario
• Salary Continuation Without A Plan
• Ad Hoc
• Consequences
• Solutions
• The Logical Solution

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Presenting The Problem And The Solution
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Insured Qualified Sick-Pay Plan

• The success of your business depends on the hard
  work and talents of your employees.
• But what if one of your key employees gets sick
  or injured and cant work?

6
The Odds Consider the chances of a long-term
disability striking one of your employees.
Age Number of People in a Group Number of People in a Group Number of People in a Group Number of People in a Group Number of People in a Group Number of People in a Group
1 2 3 4 5 6
25 57.81 82.20 92.49 96.83 96.66 99.44
30 55.14 78.97 90.35 95.56 97.97 99.07
35 50.10 75.10 87.57 93.80 96.91 98.46
40 45.33 70.11 83.66 91.06 95.11 97.33
45 39.64 63.57 78.01 86.73 91.99 95.17
50 32.87 54.93 69.75 79.69 86.37 90.85
55 24.63 43.19 57.18 67.73 75.66 81.67
60 14.17 26.33 36.76 45.72 53.41 60.01
The group of people consists of an average of
males and females in all occupation classes both
sexes and all classes were waited equally. Based
on the 1985 CIDA table and the 1980 CSO
table. Long-Term Disability is defined as
lasting 90 days or more.
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Employer Concern
Employee Concern
How will I continue my employees salary?
How will I continue to support myself and my
family?
Where will the money come from?
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Your Alternatives

• No plan
• Self-Funded Qualified Sick-Pay Plan
• Insured Qualified Sick-Pay Plan
• Which will you choose?

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No Plan

• You lose the tax deduction. (The IRS doesnt
  consider disability compensation a business
  expense.)
• You lose productivity. (Youre paying an employee
  who isnt producing.)
• You lose employee morale. (It isnt clear wholl
  get paid. Or when.)
• Can you afford not to have a plan?

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Self-Funded Qualified Sick-Pay Plan

• Put a plan in writing and youve started to solve
  the problem.
• Compensation paid during disability is a
  tax-deductible business expense.
• Employee moral is boosted.
• But you are still paying a nonproducing employee.
• Where will you get the money?

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Insured Qualified Sick-Pay Plan

• The Plan is funded with disability income
  insurance.
• You make tax-deductible premium payments.
• Those premiums arent added to your employees
  taxable income.
• The insurance company makes claim decisions.
• Plus

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Insured Qualified Sick-Pay Plan

• The insurer pays benefits so you no longer pay
  nonproducing employees.
• Premiums are waived when a covered employee
  becomes disabled.
• Security for your employees. And you.
• The affordable solution.

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The Cost Lets compare the annual cost of just
one disabled employee.
No Plan No Plan Self-Funded Qualified Sick-Pay Plan Self-Funded Qualified Sick-Pay Plan Insured Qualified Sick-Pay Plan Insured Qualified Sick-Pay Plan
Pre-Tax Profit 100,000 Profit 100,000 Profit 100,000
Income Tax 34,000 Sick-Pay 50,000 Premium 1,500

Net Profit 66,000 Pre-Tax Profit 50,000 Pre-Tax Profit 98,500

Sick-Pay 50,000 Income Tax 17,000 Income Tax 33,500

Net Cash Flow 16,000 Net Cash Flow 33,000 Net Cash Flow 65,000
Assume a 34 corporate tax-rate Typical annual
premium on an individual policy for a 40-year-old
employee. Premiums on coverage for disabled
employees are waived during disability.
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Individual-Group Combination

• Key employees covered by all individual
  disability income.
• All other employees covered by economical group
  coverage.
• OR
• Key employees covered by a combination of
  individual and group coverage.
• All other employees covered by economical group
  coverage.

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Group Long-Term Disability

• Cost effective.
• Ease of administration.
• Coverage available to employees on every job
  level.
• Benefits may be varied among occupational classes.

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Individual Disability Income

• Premiums are guaranteed.
• Coverage is non-cancelable.
• Coverage is portable.
• Liberal benefits are tailored for key employees.

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QSPP Documents

• Board of Directors Resolution
• Plan Letter

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Creative Solutions

• All Individual DI
• Combination Plans
• Executive Bonus
• Split / Split Benefit Periods

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Conclusions

• Unique Market Differentiation
• Appointments / Presentation
• Cross-Selling Opportunity
• Problem Solver
• Information Needed
• Proposals
• Follow-Up