Baltimore, MD

6/29/04

Presented by:

Michael J. Kelly, CHU, RHU

Qualified Sick Pay Plan Presentation

Welcome

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

Identify Prospects / Problem

Typical Scenario Salary Continuation Without A Plan

Ad Hoc Consequences Solutions The Logical Solution

Presenting The Problem And The Solution

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 can’t work?

The Odds…The Odds…Consider the chances of a long-term* disability striking one of your employees.

Age 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.

Employer Concern…Employer Concern…

Where will the money come from?

Employee Concern…Employee Concern…

“How will I continue my employees salary?”

“How will I continue to support myself and my family?”

Your Alternatives…Your Alternatives…

No plan

Self-Funded Qualified Sick-Pay Plan

Insured Qualified Sick-Pay Plan

Which will you choose?

No Plan…No Plan…

You lose the tax deduction. (The IRS doesn’t consider disability compensation a business expense.)

You lose productivity. (You’re paying an employee who isn’t producing.)

You lose employee morale. (It isn’t clear who’ll get paid. Or when.)

Can you afford not to have a plan?

Self-Funded Qualified Sick-Pay Plan…Self-Funded Qualified Sick-Pay Plan…

Put a plan in writing and you’ve 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?

Insured Qualified Sick-Pay Plan…Insured Qualified Sick-Pay Plan…

The Plan is funded with disability income insurance.

You make tax-deductible premium payments.

Those premiums aren’t added to your employee’s taxable income.

The insurance company makes claim decisions.

Plus…

Insured Qualified Sick-Pay Plan…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.

The Cost…The Cost…Let’s compare the annual cost of just one disabled employee.

*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.

No Plan Self-FundedQualified Sick-Pay Plan

InsuredQualified 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

Individual-Group Combination…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.

Group Long-Term Disability…Group Long-Term Disability…

Cost effective.

Ease of administration.

Coverage available to employees on every job level.

Benefits may be varied among occupational classes.

Individual Disability Income…Individual Disability Income…

Premiums are guaranteed.

Coverage is non-cancelable.

Coverage is portable.

Liberal benefits are tailored for key employees.

QSPP Documents

Board of Directors Resolution Plan Letter

Creative Solutions

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

Conclusions

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