Lisa Buonocore EDET 709 Big Redesign

Narration: Welcome to the second lesson in the Basic Flexible Benefits Plan training series. This lesson is the Positioning POP to the Employer (sometimes referred to as the decision maker). Understanding how to position Flexible Benefits Plans (Flex) to an Employer will help you close more accounts because it allows you explain the value of pre-taxing to a companys bottom line in dollars and cents. Which means to you; that you wont have to rely on your manager or Home Office to explain this value added service. And the real benefit to you is that youll be more confident knowing that you are able to assist employers with their pre-taxing needs. It is recommended that you have already gone through Lesson Number One in this series Introduction to Flexible Spending Accounts. If you have not already reviewed that lesson, please return to the menu and select Lesson One. Click the next button to start the training. ____________________________ Facilitator Notes: Above is the narration text used for the self paced version of the lesson. This is the rough draft of what will eventually be the Facilitator Guide Notes, which is still being put together. This lesson is designed to be used for both CLA of NY training there are no company specific information. There are also slides listed as (Hidden) which are in the presentation for the self paced version only and will be removed before the final Facilitator version is released. The slide animation is also contained in the Facilitator Notes please make note of when animation comes into the slide (ie by click of the mouse, with previous, etc.). This will help you to make better use of the slide and get the anticipated impact of the animation. At this point you do not necessarily have to use the Unit Of Conviction as in the narration this OUC is listed on the next slide with the topics that will be covered.

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Narration: The purpose of this training is to help you understand how to best position this value added service with an employer. The information in this training is at a high level. For more detailed information please refer to the resources noted throughout the lesson. On the Main Menu screen you can roll your mouse over each topic to get a brief explanation of that section.

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Facilitator Notes: Review the topics that you will be discussing during this lesson. Review the Unit Of Conviction: Welcome to the first lesson in the Basic Flexible Benefits Plan training series. This lesson is the Introduction to Flexible Benefits Plans. An understanding of Flexible Benefits Plans will help increase your sales because the plan is a financial tool that provides preferential tax treatment. Which means to you; that youll be able to show your clients (employers and employees) a way to save additional tax dollars. And the real benefit to you is that youll be establishing a long term business relationship and creating a benefits partner.

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Narration: The training objective for the next 20 to 30 minutes is to supply you with the basic concepts of positioning the Premium Only Plan (POP) to an Employer (sometimes referred to as the Decision Maker). You will see several examples of ways to illustrate how a Premium Only Plan works and to show the need for pre-taxing to an employer. It is advisable that you become well rehearsed at using these illustrations so that they flow well during an employer presentation.

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Narration: Flexible Benefits Plans enjoy popularity in todays marketplace and are an integral part of many employer benefit programs. Therefore, we must ask the right questions to determine if there are any issues or needs regarding Flexible Benefits Plans. This is done during the discovery portion of the small business decision maker presentation and there is a Discovery Form that can be used to record your findings during the presentation. Uncovering the level of need for a Flex plan is very important to how well you will be able to position it with the employer. Every employer you speak with will generally fall into one of the following categories: 1. Currently has a Section 125 Flex Plan. 2. Doesnt have a Section 125 Flex Plan but used to have one. 3. Doesnt have a Section 125 Flex Plan and has never had one. The Opener uses this Discovery form and the Decision Maker Presentation Script to ask questions in order to determine the needs of the employer and their business. ____________________________ Facilitator Notes:

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Narration: If the employer currently has a Flexible Benefits Plan in place, the first step is to determine their level of understanding when it comes to the benefits of pre-taxing. It is sometimes necessary to review the value of having a Premium Only Plan. If that is the case, you will need to review the example in the Benefits That Count (or sometimes called the file folder) Brochure, explaining the Win for the employer. Step two is to have the employer determine if their current Premium Only Plan is one that will allow for the inclusion of our products. If it is, then no amendment changes are required to their documents. If it does not allow for the addition of voluntary plans, then recommend that they amend their plan document to include our products. This is the preferred method for making additions mid-plan year. And keep in mind that only new or significantly improved benefits may be added mid-plan year. If its a plan that will not allow the inclusion of our products, and they are unable to amend their documents you might recommend that they run a short parallel plan. This is a stop gap option intended to get access to the employees in a pre-tax, one-on-one environment without having to wait until the new plan year. An employer should only have one flexible benefit plan but a parallel plan may be used on a temporary basis until the two plans can be merged into one. You should only use a short parallel plan when absolutely necessary; this is a last resort positioning tool to be used when i t could make the difference in closing the account. Contact AmeriFlex for more details and information regarding establishing parallel plans.

Now, if all else fails - and you are unable to offer our products on a pre-tax basis; dont give up. You can still offer them o n a post-tax basis. This does not allow the employee to take advantage of any pre-tax savings, but it will allow them to have the protection of our coverage. Their plan documents hopefully can then be amended allowing for the addition during the following plan year.
And finally step three; use a trial close to gauge the interest level of the employer. For example, your trial close might be, In your opinion, do you feel that your employees would benefit by having a broader selection of coverage on a pre -tax basis?

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Facilitator Notes: It would be helpful if you had the Making Benefits Count Brochure to review with the class.

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Narration: In the last two categories, if the employer used to have a flex plan and they never had one, the steps will be the same. First you should use the approach from the Decision Maker Script to determine the level of understanding that the employer has regarding the value of pre-taxing. Then explain the advantages for both the employer and employee using the pre-taxing example found in the Benefits That Count Brochure and script. Once you have educated the employer on the advantages of pre-taxing youll want to gauge their interest level by using a trial close. It could be as simple as, In your opinion, Mr. Employer, do you feel that the additional FICA savings your company may realize by pre-taxing would be of value to your bottom line? If the employers level of interest is high regarding saving FICA taxes, then you can leverage that information to assist in your closing. With all three categories, if you are setting up a new account and planning on pre-taxing any of our products, then you will need to complete a Flex Plan Supplemental Form along with the Account Information Form and send them to Home Office. This starts the account setup process supplying you with the Billing Control Number (commonly referred to as the BCN). You will need the BCN for step three: which is to complete and submit AmeriFlexs Online ePOP Application form. The link is on this screen, but you can also access everything through our website. The ePOP application material will be sent by AmeriFlex electronically to the employer with all the details, instructions and required documentation. Be sure to include your email address on the ePOP application in addition to the address of the employer. This will ensure that you are copied on all the correspondence received by the employer. This all leads to step four implementing the premium only plan. The first part in implementing a POP is for the employer to make certain decisions about plan design, within the guidelines established by the IRS. Our partner, AmeriFlex will guide the employer through these plan design choices. In fact, many of the design choices take place on the ePOP Application before it is submitted. Next the plan document, Summary Plan Description, and plan adoption agreement are created through the AmeriFlex ePOP system and delivered electronically to the employer. And finally the employer should review the plan document for accuracy. Once the employer is satisfied with both the plan document and the summary plan description, they can officially adopt the plan using the plan adoption agreement provided. The employer must adopt the plan on or before the effective date of the plan.

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Narration: The addition of a Flexible Benefits Plan to a companys employee benefits program has the potential to save tax dollars for the employer and the employees. To understand and appreciate the benefit of adding a Flex plan, you must understand the basics of payroll taxes. This illustration shows the payroll taxes that are typically paid by an employee and an employer. First lets look at FICA which is Social Security taxes. FICA is short for the Federal Insurance Contributions Act and is paid at 7.65 percent by both the employee and employer for a total of 15.3%. The employer matches the employees FICA payment. The employee is responsible for paying Federal income tax and State income tax. These of course vary by the employees individual situation and by the state in which they reside. The employer is responsible for federal and state unemployment tax (FUTA and SUTA). FUTA is based on the first $7,000 of income. It has a maximum of 6.0 percent or a minimum of 0.6 percent. SUTA varies by state.

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Narration: Premium conversion involves a simple bookkeeping entry change. However, in order for an account to implement a premium only plan (POP), they must have a payroll system that will allow for a change to be made in the software package. Employers may need to contact the person responsible for making changes to their payroll system before they implement the plan. If an employer currently offers a 401(k) plan, the system should already be designed to take pretax deductions.

Now - when communicating the concept and value of pre-taxing to an employer it is usually necessary to start by explaining the impact of pre-taxing to their employees. This is the first win in the win win scenario. When explaining to the employer how a premium only plan works; simply demonstrate the

before and after effect on an employees paycheck. You can do this through a salary illustration on your laptop or more commonly through the $1,000 example in the Benefits That Count Brochure. Then, discuss how pre-taxing benefits lowers an employees FICA deductions as well as the employers matching FICA amount. There are three distinct advantages to using a Premium Only Plan to an employer: Employees taxable income will be reduced, thereby reducing employers share of FICA taxes. Employers may benefit from employee retention. Employers may benefit from expanded employee benefits. In explaining the example to the employer, you start by explaining that you want to show the impact on an employees paycheck by pre-taxing. In this example the employee makes $1,000 each pay period. In the scenario without a POP the first thing that happens is the taxes are calculated on the entire $1,000. In this case that amount comes to $176.71, which is the first thing deducted from the $1,000 each pay period. That leaves the employee with $823.29. Then the insurance premiums of $180.00 are deducted from the $823.29 leaving $643.29 as the employees take home pay or spendable income. Now, in the with a POP scenario we still have the same $1000.00 in salary each pay period, but the first thing that is deducted is the $180.00 for the insurance premiums. This is done before any taxes are calculated it is done pretax. <ANIMATION Arrow pointing appears> This leaves $820.00, which is now the employees taxable income. The taxes are calculated as $132.34, which is deducted from the $820, leaving $687.66 as the take home pay. This is an increase of $44.37 in take home pay as compared to the without POP scenario. This employee saves $44.37 each pay period just by pre-taxing their insurance premiums. <ANIMATION Star with $45.72 appears > The annual tax savings adds up to $1064.88. This is a huge win for the employee but remember, the employer saves the matching FICA!

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Narration: How much can an employer really save? This example is a good one to have ready during an employer presentation to show the value of the matching FICA savings based on the number of employees. This example shows that an employee pays $500.00 per month for their health insurance. Over the course of a year that adds up to $6,000. The FICA taxes on that $6,000 is 7.65% or $459 a year. That means on that $6,000 the employee saves $459 in FICA taxes and the employer matches with a $459 FICA savings. If the employer had 5 employees, that would mean a savings of $2,295 a year in matching FICA taxes. If they had 20 employees they would save $9,180. You can see how the savings can add up as we add more employees. Keep in mind that this is not a one time savings for the employer they will save this each year. In fact, as employees add additional benefits that qualify to be pretaxed, like many of our products, that savings will actually increase as more premium dollars are pre-taxed. This is a win for the employer!

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Narration: This illustration shows the win for the employer from an annual payroll perspective. In the example, lets assume the employer has 25 employees, pays an annual payroll of $500,000. Each employee pays $100 per month for insurance benefits ($100 x 25 employees x 12 months = $30,000 per year in employee benefit contributions). By adding a Premium Only Plan, the employer is not required to pay their matching share of FICA on the amount employees pay for benefits on a pretax basis and can potentially realize a tax savings of $2,295 annually. This $2,295 in tax savings goes right to the employers bottom line as pure profit. __________________________________________________________________________ ________________ Facilitator Notes:

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Narration: In this example we look at what that $2,295 annual savings means in terms of the companys profit margin. If the company sells wooden shoes and has an 8% profit margin; that would mean that they would have to sell $28,688 worth of wooden shoes in order to realize the same $2,295 in profits. The way you calculate that is to divide the savings amount ($2,295) by the profit margin (8%).

Now, if the wooden shoes sell at $50.00 a pair, the company would need to sell 574 pairs of wooden shoes to earn enough in profits to equal the $2,295 in FICA savings. The way you calculate that is to divide the required sales ($28,688) by the price per pair ($50).
This illustration is a great way to show an employer what that tax savings means to them by putting it in terms they can identify with as a business owner. In order to have $2,295 in profits they would have to sell 574 pairs of wooden shoes. This FICA saving they realized is equivalent to an additional $28,688 in sales. The beauty is that this savings is not just for that year, but the company will continue to save FICA taxes as long as the Flex Plan is in place, and that savings will grow as more benefit dollars are pretaxed.

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Narration: Many employers may question why an insurance company should be involved in their flexible benefits plans. If this question arises regarding the companys involvement, use the following (on the slide) points. We specialize in providing employees with voluntary employee benefits, including enrollment in flexible benefits plans. We can help make an employers flexible benefits plan a success through group meetings, individual consultations, and streamlined communication and enrollment procedures. We can provide a source for POP administration services to employers at no cost to them when they offer our voluntary insurance products to their employees. We can provide a source for low-cost FSA plans and claim administration, in conjunction with offering our voluntary insurance products to their employees. We provide employee communication materials, individual salary illustrations (generated through the laptop computer), trained representatives, and close coordination with the employers payroll department. Finally, we have consistently received high ratings in the insurance industry. Offering our insurance products through flexible benefits plans lets you provide support for employers who wish to implement such a program. This combination allows both employers and employees to reap the benefits of implementing flexible benefits plans and utilize our proficiency in benefits communication and enrollment. ________________________________________________________ Facilitator Notes: This is a good point to talk about our Readers Choice awards.

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Narration: Here we have an example of a Unit of Conviction. As a sales representative you will soon, if you have not already, be introduced to selling with Units of Conviction. This unit of conviction is followed by an in your opinion trial close which is used to gauge the interest level of the employer. Both of these selling techniques are used throughout the Decision Maker Script with the Benefits That Count Brochure.

We can help you reduce your payroll taxes because as our client, we will assist you in establishing a Section 125 Premium Only Plan at no cost. Which means to you; that you will be able to make benefits more affordable for your employees through preferred tax treatment. And the real benefit to you is that youll be able to enhance your current benefits program by offering additional choices to meet the individual needs of your employees, increasing employee morale and retention.
In your opinion Mr./Ms. Employer, do you feel that reducing your payroll taxes while retaining quality employees would be beneficial to your company? __________________________________________________________________ Facilitator Notes: Take a few minutes here and have them role play the $1,000 example with the Benefits That Count Brochure using the Unit Of Conviction and Trial Close.

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Narration: When an employer decides to adopt a Flexible Benefits Plan, the sales representative has certain responsibilities including: Completing and submitting the Flex Supplemental Form. Completing and submitting the AmeriFlex Online Application before starting the enrollment. The Flexible Benefits Plan documents must be signed prior to the start date of the plan year to be compliant. Notifying employees of the upcoming enrollment. This can be done a number of different ways depending on what the employer will allow and the working conditions of the business. The most common is a poster or flyers in the break room announcing the upcoming enrollment. Be careful and do not put too much information on the posters or flyers have just enough to pique their interest. Delivering and reviewing the plan documents with the employer at least three weeks prior to the enrollment. This gives the employer time to have the documents reviewed by legal and tax experts. AmeriFlex will send them electronically, but it is a good practice to make sure the employer receives them and offer to review them if needed. Reviewing the employers responsibilities. We will be covering the Employers responsibilities with the next slide. It is recommended that you ensure that they understand their role and responsibilities regarding a Premium Only Plan. Preparing all laptops, enrollment forms, brochures, and any other materials needed for the enrollment. Ameriflex ePOP Link: https://www.epopdocs.com//index.php?template=colonial

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Narration:

We do not act as a plan administrator or a plan sponsor. The employer is the plan administrator and plan sponsor of their Flexible Benefits Plan. The employer has the sole responsibility to comply with all plan administration, implementation, amendments, filing, reporting, disclosure, and plan compliance requirements imposed by the plan, ERISA, the Internal Revenue Code, or any other applicable law, specifically including but not limited to the following: Reviewing the plan documents provided by AmeriFlex with tax or legal counsel; executing the plan adoption resolution before the first day of the plan year; and distributing the Summary Plan Description to employees on or before their enrollment date. Conducting initial and annual enrollments. We will assist the employer to make sure that all eligible employees are properly informed during each enrollment period as well as new employees as they become eligible. Ensuring that benefits offered under the plan qualify for inclusion in a Flexible Benefits Plan. Determining whether election changes are permissible in accordance with the provisions of the plan and Internal Revenue Code requirements. Performing nondiscrimination testing required by the Internal Revenue Code. We do not perform nondiscrimination testing. Nondiscrimination testing should be performed as of the last day of the plan year. Filing an annual Form 5500 return for each qualified benefit under the Flex Plan within seven months after the end of each plan year if the plan is subject to ERISA filing requirements. Retaining documentation relating to plan operations that may be requested in an IRS or Department of Labor audit of plan operations, including but not limited to nondiscrimination testing information and executed copies of the plan documents, including a description of each eligible benefit, Salary Reduction Election forms, plan amendments, and resolutions adopting the plan, for seven years after the close of each plan year.

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Narration: Through our partner AmeriFlex, we will assist in providing all the required documents for a Premium Only Plan. These documents include: A Plan Document An Adoption Resolution A Summary Plan Description We will also assist the employer to inform all eligible employees about the Flexible Benefits Plan that their employer is providing. All of these documents and services are provided at no charge to qualified employers. We will take care of the cost of setting up a Premium Only Plan as long as the minimum enrollment requirements are met a minimum of $1,800 in annualized premium must be written. These requirements must be maintained for us to continue providing this value added service for the employer.

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Narration: We have many excellent resources and tools when it comes to Flexible Benefits Plans. All of the marketing materials can be ordered and shipped to you and many can be printed right from ProducerNet. On the screen you see several Internet links where you will find all the information about our partnership with AmeriFlex, as well as many useful forms and processes. Please take the time to review all the information you can about Section 125 and Flexible Benefits Plans. Now lets see how much youve learned with a short quiz!

Links: Ameriflex ePOP: https://www.epopdocs.com//index.php?template=colonial ProducerNet: https://producer.coloniallife.com/Departments/Marketing/FlexibleBenefits/FlexibleBenefit s.asp Guide to Flexible Benefits: https://producer.coloniallife.com/Departments/Training/GuideToFlexBenefits/default.asp Flex125.com: https://www.flex125.com/af_site2/home.asp

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Facilitator Notes: The following three slides are questions that you can ask the class and see if they learned anything!

Question One: If an employer currently has a Flexible Benefits Plan, they can: Amend the current cafeteria plan. Combine the plans to create a Section 225 plan. Both A and B . All of the above.

The correct answer is a Amend the current cafeteria plan. You cannot combine to plans and create a Section 225.

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Question Two: A producer and the company can give the employer legal or tax advice. True False The correct answer is b False. The Colonial Life producer and the company are not legal or tax advisors and cannot give legal or tax advice.

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Question Three: Which of the following is not a responsibility of the sales representative when implementing a Flexible Benefits Plan? Completing and submitting the Online Application Form for ePOP. Performing nondiscrimination testing. Delivering and reviewing the plan documents with the employer. Notifying employees of upcoming enrollments. The correct answer is b Performing nondiscrimination testing. Nondiscrimination testing is the responsibility of the plan sponsor, which in most cases is the employer or their human resource representative, not the producer.

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