Planning for a Brighter FutureTHE BENEFITS OF STARTING A RETIREMENT PROGRAM

Why Start a Retirement Program?

Personal Retirement

Individual and Business Tax Savings

Proactively Prepare for the Future

Attract and Retain Valued Employees

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Planning for a Brighter Future

© 2011, Paychex, Inc. This information is provided with the understanding that Paychex is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert service is required, the service of a competent professional should be sought.

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Planning for a Brighter Future

Planning for a Brighter Future

Social Security is anything but secure.

– Replaces only about 27% of your income

– By 2015, will pay out more than it collects

– By 2037, will be unable to cover benefits

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InvestingPeriod

Post-Tax* $500/mo.

Deposit into Conventional Savings Account

Pretax* $500/mo.

Contribution into Retirement Plan

Pretax*Advantage

10 Years $89,993 $103,276 + $13,283

20 Years $281,473 $382,848 + $101,375

30 Years $689,419 $1,139,663 + $405,244

*Assumes 25% tax rate, 10% rate of return, compounded monthly

Your Retirement Plan – The Pretax Advantage

Planning for a Brighter Future

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$156,779$518,801

$1,236,816 $1,354,757

10 Years 20 Years 29 Years 30 Years

The Advantage of Compounding InterestAssumes a $500 monthly pretax contribution

Planning for a Brighter Future

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The Compounding Advantage Starting now pays off later

– The earlier you start investing, the more your contribution

can grow

What is compounding interest?

– Reinvesting earned interest to earn additional interest

– The more frequent the compounding, the more you can earn

Looking into the crystal ball at 40 years old

$85,000 salary 10% annually Retire at age 65 8% return* $873,000

at retirement

Planning for a Brighter Future

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*This illustration shows a hypothetical rate of return of 8%. Actual investments may return more or less.

Planning for a Brighter Future

Looking into the crystal ball at 35 years old

$165,000 salary 10% annually Retire at age 65 8% return* $2,700,000

at retirement

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*This illustration shows a hypothetical rate of return of 8%. Actual investments may return more or less.

Looking into the crystal ball at 25 years old

$35,000 salary 5% annually Retire at age 65 7% return* $548,000

at retirement

Planning for a Brighter Future

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*This illustration shows a hypothetical rate of return of 7%. Actual investments may return more or less.

Attracting High-Quality Employees

Research shows that without benefits, a small- business owner has trouble attracting the best quality employees.

75% of employees ranked “my ability to affordretirement” as their top concern.*

64% of employees said that a retirement plan is critical or very important.**

Yet, only 36% of employers said it wascritical or very important to theirrecruitment and retention efforts.**

*2011 Top Five Total Rewards Priorities Survey, Deloitte Consulting LLP

**MetLife Ninth Annual Study of Employee Benefits Trends, 2011

A Benefit for Your Business

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Retaining Valued Employees

If you don’t offer a retirement plan,don’t be surprised if you lose employeesto a competitor that does!

40% of workers in small companies say they would leave their job foranother that provided a 401(k) plan.*

*Survey by Harris Interactive, sponsored by ShareBuilder 401(k), a subsidiary of ING Direct.

A Benefit for Your Business

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Three Easy Ways to Fund Your 401(k)

1) Pretax Employee Salary Deferral

– Directly out of paycheck each pay period before taxes

2) Employer Match – % match by employer into employee 401(k)– Tax-deductible contribution for the employer

3) Employer Profit Sharing – Annual tax-shelter opportunity – Lump-sum contribution

401(k) – A Flexible Retirement Program Option

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2011 401(k) Contribution Opportunities

Pretax Employee Salary Deferral (1%-96%)– Maximum contribution $16,500

Employer Match – 0%-25% per pay period

Employer Profit Sharing – 0%-25% year end

Maximize Your 401(k) Contributions

Note:

• The IRS caps any employee at an income level of $245,000.

• An employee over 50 can defer an additional $5,500 per year.

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Three Simple Decisions

1) Determine Eligibility Requirements

2) Select Your Fund Options

3) Determine Matching/Vesting Options

How to Start Your 401(k)

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Matching Options

Employer Matching

Contribution

Not to Exceed

This Percentage

of Salary

Employer’s Maximum Matching

Percentage

1100% of first 3%50% of next 2%

5% 4%

2 0% 0% 0%

3 25% 4% 1%

4 50% 4% 2%

5 50% 6% 3%

6 100% 3% 3%

Years of Vesting

from Date of Hire Vesting Percentage

Option 1 Option 2 Option 3

1 100% 0% 0%

2 100% 0% 20%

3 100% 100% 40%

4 100% 100% 60%

5 100% 100% 80%

6 100% 100% 100%

Employer 401(k) Matching/Vesting Options

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How to Start Your 401(k)

You Manage Many Relationships

Typical Non-Paychex 401(k) Model

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Paychex Manages Those Relationships for You

The Paychex 401(k) Advantage

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Required legal documents Adoption agreement Plan document Summary plan description

Payroll integration of employee and employer contributions and census data

Enrollment meeting and enrollment kits Automatic enrollment option Roth contribution option Account access via participant Web site

or automated phone system Toll-free phone support Daily valuation of account balances Deferral calculations for pretax and Roth contributions Electronic recordkeeping and fund transfer each pay period Quarterly IRS nondiscrimination testing Quarterly management reports Quarterly participant statements Loan modeling and administration Discretionary profit-sharing plan Preparation of Form 5500 Preparation of Forms 1099-R and 945

What Paychex Does for You

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Paychex Fixed Fund Select Several preselected menus from a variety

of multiple-fund families Option to move from one fixed-fund menu Move to Guided Fund Select or Open Fund Select without

penalty*

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*Fund fees may apply. Refer to each fund prospectus for details on fees.

Investment Plan

Paychex Guided Fund Select Fund fiduciary service through our partner GuidedChoice®

Provides the quarterly review and benchmarking Provides an investment policy statement Acts like an investment policy committee Offers several preselected, dynamic menus using a variety of

fund families Advisory services provided by GuidedChoice Asset

Management, Inc.

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Investment Plan

Investment Plan

Paychex Open Fund Select Flexibility, choices, and control Create a specific menu tailored to your needs Up to 4,500 fund choices from hundreds of fund families Add and delete funds at the plan sponsor’s discretion

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Flexible Spending AccountsANOTHER PRETAX BENEFIT

What Is a Flexible Spending Account (FSA)?

Section 125 of the IRS tax code Allows employees to pay for out-of-pocket expenses on a

pretax basis:– Medical– Dental– Vision– Certain over-the-counter items – Note: Over-the-counter medications or drugs must

have a doctor’s prescription– Dependent Care

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Savings!

Employee:– Federal income tax savings– Tax savings on FICA– State tax savings

APPROX. 25%–45% SAVINGS ON EXPECTED GOODS AND SERVICES

The Benefits of an FSA

Employer:– Savings on FICA tax– Savings on unemployment tax

APPROX. 8%-10% SAVINGS ON PAYROLL TAXES

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Allows for Saving in Three Different Spending Buckets

Flexible Saving for Flexible Spending

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InsurancePremiums

Dependent CareExpenses

Out-of-PocketMedical, Dental,

and Vision Expenses

Preparation of required legal documents Enrollment meeting and materials Payroll integration (for Paychex payroll clients) FSA debit card Weekly claim processing within two business days Direct deposit of reimbursements Participant Web site and toll-free support Employer and employee status reports Discretionary employer contributions allowable through

employer-funded FSA Regular nondiscrimination testing

We Help Manage the Details

What Paychex Does for You

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