The Benefits of Flex

1. The Benefits of Flex ABC Employer 2005 Plan Year February 1 – January 31 Pacific Administrators

2. Today’s Purpose • Introduce the Concept of Pre Tax Benefits • Eligible Benefits: POP & FSA’s • How the Plan Works • What’s Next: Your Responsibilities at Open Enrollment • Common Q & A’s Pacific Administrators

3. Tax Free Benefits • A quick review of how taxes affect your pay. • Your gross pay is taxed first, then your costs of benefits are withheld. You’re taxed on your entire pay. • Section 125 allows benefit costs to be withheld pre-tax. • Your benefit costs are deducted from your gross pay first, then you’ll be taxed on the remaining amount. • Bottom line: You’ll save money with flex! Pacific Administrators

4. Your Flex Plan Benefit Choices • Premium Only Plan (POP) • Flexible Spending Accounts (FSA) Pacific Administrators

5. Premium Only Plan • Your cost of eligible benefit premiums can be withheld pre-tax, such as: • Group health, dental and vision insurance premiums. • Certain voluntary insurance premiums. • You’ll immediately benefit by having more take home pay due to lower taxable wages. Pacific Administrators

6. Flexible Spending Accounts • Child/Dependent Care FSA • Expenses you incur for the care of your child or dependent that allows you to work. • Health Care FSA • Out of pocket expenses for you and your family such as co-pays, deductibles, glasses, prescriptions, chiropractic and dental care. Pacific Administrators

7. Child/Dependent Care FSA • Child care expenses up to age 13; • Or, care of a dependent that is physically/mentally incapable of caring for him/herself; • The expense must be work related; • Maximum exclusion is $5000 per year for one or more dependent; • Remember that you can not claim the child care credit if you pre tax the expense. Pacific Administrators

8. Health Care FSA • You can include expenses for you and your family, regardless of the health plan they may be enrolled in. • Estimate the typical out of pocket expenses you will incur during the plan year. Maximum exclusion is $3000. • Do not include expenses that would be for cosmetic purposes (face lifts or teeth bleaching). • New in 2004, you can include many of the over-the-counter drugs/medicines (vitamins and supplements are ineligible) Pacific Administrators

9. How the Plan Works • Once a year you determine the amount you would like to elect for each Flexible Spending Account. • The amount you elect is divided by the number of pay cycles you have, and withheld in equal amounts throughout the plan year. Pacific Administrators

10. Getting Reimbursed • As you incur eligible expenses for services that have been rendered, submit a copy of the bill, invoice, EOB or other statement in the voucher envelopes provided. • Reimbursement requests should be processed within a few days of the following payroll cycle. • Your flex check can be a “direct deposit” (form on back of enrollment form) or standard check. Pacific Administrators

11. Reimbursement Details • The Dependent Care FSA will reimburse you up to the balance in your account. • The Health Care FSA will reimburse you up to the amount you’ve elected for the plan year, regardless of account balance. Pacific Administrators

12. You may only enroll during open enrollment, or upon initial benefits eligibility. You are enrolling for the plan year, all expenses must be incurred within the plan year. Once you’ve enrolled, your election amounts can not be stopped or changed unless you experience a qualifying “status change.” Important Details Pacific Administrators

13. More Details…. • Use it or lose it – unused amounts are forfeited, so consider your election amounts carefully. • By taking advantage of the plan, you’ll pay less in payroll taxes. This may result in a nominal reduction in your eventual Social Security Benefits. Pacific Administrators

14. Next Steps • Review the packets provided – they provide full details and worksheets to assist you. • Complete and submit your enrollment form. • If you are already on the plan and are re-enrolling, a custom form will be provided to you to make enrollment even easier. Pacific Administrators

15. Contact Information • The plan recordkeeper is Pacific Administrators. They can be reached by: • Telephone 800-427-4549 • Fax 951-656-9276 • Email: flex@pagroup.us • Please call if we can answer any questions! Pacific Administrators

16. Q & A’s • Will I be taxed on reimbursements? • No. Reimbursements are tax free! • Can I include expenses for my family? • Yes, expenses for your spouse and dependents are qualified under the plan. • Can I enroll in the plan now and stop later in the year? • Generally no. When you enroll in the plan, it is for the entire plan year. You are not permitted to stop or change election amounts unless you experience a qualifying “change in status.” Pacific Administrators

17. Q & A’s • How do I know what my account balance is? • You’ll receive a statement with each reimbursement and at the end of each month. • What if I change employment? • You may submit expenses for an extended period of time. See plan documents for details. For full details and plan information, please refer to the Plan Documents and Summary Plan Descriptions. Pacific Administrators