David Foster, JD, CLU, ChFC Presenting: The Changing Landscape of Qualified and Non-qualified Retirement Plans

1. David Foster, JD, CLU, ChFC Presenting: The Changing Landscape of Qualified andNon-qualified Retirement Plans

2. Alpha’s New Services: Financial Services • Executive Compensation / Benefits • Incentive 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 • Executive Long Term Care Programs • Phantom Stock, Stock Options & Stock Appreciation Rights • Retirement and college education savings projections

3. Alpha’s New Services: Financial Services • Estate Planning • Estate Tax Planning • Asset Protection • Trust Planning • Business Succession Planning • Buy-Sell Agreements • Exit Planning Strategies • Management Buy-Out Arrangements • Planning for Children With Special Needs • Planned Giving Alternatives • Employee Stock Ownership Plans • Family Business Continuation

4. Alpha’s New Services: Financial Services • Qualified Retirement Plans • Defined Contribution Plans – 401(k), 403(b), Profit Sharing, SIMPLE Plans, ESOPs • Defined Benefit Plans – Pension Plans, 412(i) Plans • Products • Mutual Funds • Annuities • Managed Investment Accounts • Life Insurance • Disability Insurance • Long Term Care

5. Alpha’s New Services: Total Retirement Solutions • 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

6. 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

7. 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

8. 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

9. Pension Protection Act of 2006 - PPA • Background • Effective dates • Provisions

10. Pension Protection Act of 2006 – PPA:Background • 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

11. Pension Protection Act of 2006 – PPA:Effective Dates • Various effective dates • EGTRRA 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)

12. Today’s Focus – 401(k) Changes

13. Today’s Focus – 401(k) Changes:EGTRRA Permanency Growth Opportunities • Makes permanent higher contribution limits for 401(k)s and IRAs, enabling more workers to build larger retirement nest eggs: • Increased Deferral Limits • Catch-up Contributions • Increased 415 Limits • Saver’s Credit • After-Tax Contribution Rollovers • Direct Rollovers to Roth IRAs • Roth(k) Contributions

14. Today’s Focus – 401(k) Changes:Automatic Enrollment • 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 months • Automatic Enrollment Safe Harbor (2008):

15. Today’s Focus – 401(k) Changes: Faster Vesting • Effective 2007 • Current Law • Employer “other” contributions • 5 year cliff vesting • 7 year graded • Employer “matching” contributions • 3 year cliff vesting • 6 year graded • PPA – All employer contributions: • 3 year cliff vesting • 6 year graded

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

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

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

19. Today’s Focus – 401(k) Changes:Other Provisions - COLI • Tax trap for corporate owned life insurance • Notice and consent requirement • Exceptions based on insured’s status • IRS information reporting requirement

20. American Jobs Creation Act of 2004 • New Rules for Non-qualified Deferred Compensation Plans • Consequences of Non-compliance

21. 409A • 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

22. Non-Compliance • Compensation subject to immediate taxation • Interest at IRS rates plus 1% • 20% penalty on amount that should have been included as taxable income

23. Due Diligence • Review current executive compensation arrangements, including individual employment contracts • Work with advisors to make sure compensation agreements are in compliance with 409a.

24. Additional Updates • PA Taxation of Non-qualified Deferred Compensation • Split Dollar Regulations • Tax Treatment of Long Term Care Insurance • Life Insurance Product Improvements • Viatical Settlements

25. Todd Hons Presenting: Medical Carrier Updates

26. Trends • Medical Rates Lower Renewals!

27. 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

28. In addition to the March 1, 2006 Rx changes, BlueCross added 3 more plan available October 1, 2006 *No ancillary charge when provider writes ‘Dispense as written’

29. 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

30. 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

31. 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

32. 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

33. 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)

34. 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

35. 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

36. Select Rx Option • Automatically 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

37. Gettysburg Hospital back in the network • New “EOBs” – Explanation of Benefits • Lehigh Select Products • Available to groups in Lehigh, Carbon, Northampton counties • Plan includes competitive rates and benefit incentive to use Lehigh Valley Hospital

38. Offers fully insured products • Medical underwriting for all products • Working on competitive pricing • Accesses Highmark Blue Shield statewide doctor network

39. Carrier Updates: Aetna • York Hospital (Wellspan) recently joined network • Lancaster General in network • New Plan designs with deductible and co-insurance

40. Carrier Updates: United Healthcare • Still building doctor and hospital network • Full array of PPO products • National capabilities

41. Rx’s Coming Off PatentOver 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

42. Plan Year vs. Calendar Year Deductibles

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

44. 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

45. 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

46. High Deductible Update • Medical Expense Reimbursement Plan (MERP Plan) • Deductibles increasing • 100 Groups In-force • Health Savings Accounts • Starting to make financial sense