David Foster, JD, CLU, ChFC

Presenting:

The Changing Landscape of Qualified andNon-qualified Retirement Plans

Executive Compensation / BenefitsIncentive 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

Alpha’s New Services:Financial Services

Executive Long Term Care Programs

Phantom Stock, Stock Options & Stock Appreciation Rights

Retirement and college education savings projections

Estate PlanningEstate Tax Planning

Asset Protection

Trust Planning

• Business Succession Planning– Buy-Sell Agreements

– Exit Planning Strategies

– Management Buy-Out Arrangements

Alpha’s New Services:Financial Services

Planning for Children With Special Needs

Planned Giving Alternatives

Employee Stock Ownership Plans

Family Business Continuation

Qualified Retirement PlansDefined Contribution Plans – 401(k), 403(b), Profit Sharing, SIMPLE Plans, ESOPs

Defined Benefit Plans – Pension Plans, 412(i) Plans

ProductsMutual Funds

Annuities

Managed Investment Accounts

Life Insurance

Disability Insurance

Long Term Care

Alpha’s New Services:Financial Services

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

Alpha’s 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

Alpha’s 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

Alpha’s 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

Alpha’s New Services:Total Retirement Solutions

Background

Effective dates

Provisions

Pension Protection Act of 2006 - PPA

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

Pension Protection Act of 2006 – PPA:Background

Various effective datesEGTRRA 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)

Pension Protection Act of 2006 – PPA:Effective Dates

Today’s Focus – 401(k) Changes

Makes permanent higher contribution limits for 401(k)s and IRAs, enabling more workers to build larger retirement nest eggs:

Increased Deferral LimitsCatch-up ContributionsIncreased 415 LimitsSaver’s CreditAfter-Tax Contribution RolloversDirect Rollovers to Roth IRAsRoth(k) Contributions

Today’s Focus – 401(k) Changes:EGTRRA Permanency Growth Opportunities

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 monthsAutomatic Enrollment Safe Harbor (2008):

Today’s Focus – 401(k) Changes:Automatic Enrollment

Effective 2007Current Law

Employer “other” contributions5 year cliff vesting

7 year graded

Employer “matching” contributions3 year cliff vesting

6 year graded

PPA – All employer contributions:3 year cliff vesting

6 year graded

Today’s Focus – 401(k) Changes: Faster Vesting

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

Today’s Focus – 401(k) Changes: DB/DC Combined Plan Deduction Limit

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

Today’s Focus – 401(k) Changes: Participant Account Statements

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

Today’s Focus – 401(k) Changes:Professional Investment Advice

Tax trap for corporate owned life insurance

Notice and consent requirement

Exceptions based on insured’s status

IRS information reporting requirement

Today’s Focus – 401(k) Changes:Other Provisions - COLI

New Rules for Non-qualified Deferred Compensation Plans

Consequences of Non-compliance

American Jobs Creation Act of 2004

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

409A

Compensation subject to immediate taxation

Interest at IRS rates plus 1%

20% penalty on amount that should have been included as taxable income

Non-Compliance

Review current executive compensation arrangements, including individual employment contracts

Work with advisors to make sure compensation agreements are in compliance with 409a.

Due Diligence

PA Taxation of Non-qualified Deferred Compensation

Split Dollar Regulations

Tax Treatment of Long Term Care Insurance

Life Insurance Product Improvements

Viatical Settlements

Additional Updates

Todd Hons

Presenting:

Medical Carrier Updates

Medical Rates

Lower Renewals!

Trends

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

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

Retail Co-pays Mail Co-pays Ancillary Charge?*

5/35/50 15/70/125 No

15/30/50 40/75/125 No

10/30/50 25/75/125 Yes

*No ancillary charge when provider writes ‘Dispense as written’

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

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

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

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

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)

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

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

Select Rx OptionAutomatically 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

Gettysburg Hospital back in the network

New “EOBs” – Explanation of Benefits

Lehigh Select ProductsAvailable to groups in Lehigh, Carbon, Northampton counties

Plan includes competitive rates and benefit incentive to use Lehigh Valley Hospital

Offers fully insured products

Medical underwriting for all products

Working on competitive pricing

Accesses Highmark Blue Shield statewide doctor network

York Hospital (Wellspan) recently joined network

Lancaster General in network

New Plan designs with deductible and co-insurance

Carrier Updates:Aetna

Still building doctor and hospital network

Full array of PPO products

National capabilities

Carrier Updates:United Healthcare

Rx’s Coming Off Patent

Over 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

Captial BlueCross / Keystone Health Plan

Calendar Year

Highmark Blue Shield Plan Year

HealthAmerica and HealthAssurance

Plan Year

United Healthcare Calendar Year

Aetna Calendar Year

Significa Plan Year or Calendar Year

Plan Year vs. Calendar Year Deductibles

If someone is over age 65 and still working full-time, they are NOT eligible for Medicare Part D

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

Dates for providing a creditable coverage notice to employees/retirees:

By November 15th of each year, starting in 2005

Prior to an individual’s initial enrollment period

Prior to the effective date of coverage for any Medicare-eligible individual that joins your group’s 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 individual’s request

Medical Expense Reimbursement Plan (MERP Plan)

Deductibles increasing

100 Groups In-force

Health Savings AccountsStarting to make financial sense

High Deductible Update