Welcome11th Annual Client Exchange

John A. Carnevale, JD

President & CEO

Sentinel Benefits Group, Inc.

About Today

Our New Format Introduction and Top Benefit Ideas Trends in Benefit Programs & Planning for the Future Economic Overview & Market Update Networking Lunch U.S. Health Care Reform Update Social Security & Medicare: What Every Employer

Should Know

Global Economic Concerns Hit Home

John A. Carnevale, JD

President & CEO

Sentinel Benefits Group, Inc.

Confusion, Fear, Uncertainty

S&P 500 Index at Inflection Points

Source: Standard & Poor’s, First Call, Compustat, FactSet, J.P. Morgan Asset ManagementDividend yield is calculated as the annualized dividend rate divided by price, as provided by Compustat. Forward Price to Earnings Ratio is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next twelve months (NTM), and is provided by FactSet Market Aggregates. Returns are cumulative and based on S&P 500 Index price movement only, and do not include the reinvestment of dividends. Past performance is not indicative of future results.Data are as of 6/30/11.

Global Economic Instability

Housing Crisis is Far from Over

Jobs, Jobs, Jobs

Savings Rates Slip

66%

72%

75%

68%69%

60%

62%

64%

66%

68%

70%

72%

74%

76%

2007 2008 2009 2010 2011

Savings Rate

Unemployed people have dipped into retirement savings. Underemployed people can’t afford to save for retirement. Low savings account interest rates discourage savings.

Source: Forbes, Why are Retirement Rates Falling Again? 9/14/2011 @ 3:01pm

Worker’s Pessimism about Retirement Deepens, Reflecting “the New Normal”

2011 Retirement Confidence Survey

“Not Confident” up: 27% of American workers are “not at all confident” about having enough money for retirement. This is the highest level ever measured in 21year history of the RCS. 45% are “not too” or “not at all confident” they and their spouse will

be able to save as much as they think they need. “Very Confident” down: 13% of American workers say they

are “very confident” – the lowest level ever recorded by RCS.

Drawing on savings: 34% of American workers and 33% orretirees are tapping their IRA, 401(k), savings or investment accounts in order to pay for basic expenses.

Source: Employee Benefit Research Institute, 2011 Retirement Confidence Survey

State of Utter Confusion

70% of workers say they are a little or a lot behind schedule in planning and saving for retirement.

31% say they will need less than $250,000 to afford a comfortable retirement.

42% say they determined their retirement savings needs by guessing.

Source: Employee Benefit Research Institute, 2011 Retirement Confidence Survey

How is this impacting employers?

Delayed Retirement 20% of workers now intend to retire later (at an older age)

than they had planned. Why?

36% cited the poor economy.15% cited lack of faith in Social Security or the government.15% cited change in employment situation.13% cited can’t afford to retire.

Older workers are working longer to:Gain access to company provided healthcare Increase earning years to accumulate assets in defined

contribution plans

Source: Employee Benefit Research Institute, 2011 Retirement Confidence Survey

Implications of Delayed Retirement

Since 1993, the overall labor-force participation rate has steadily grown, reaching 40.2 percent in 2010—the highest level over the 1975–2010 period.

Paying for health care in retirement is a growing concern for active workers.

48% of active workers are “confident” of having enough money to take care of medical expenses in retirement vs. 50% “not too” or “not at all confident.”

68% of today’s retirees are confident about taking care of their medical expenses vs. 30% not confident.

Source: Employee Benefit Research Institute, 2011 Retirement Confidence Survey

Five Benefit Ideasfor today’s uncertain times

John A. Carnevale, JD

President & CEO

Sentinel Benefits Group, Inc.

Five Ideas to Consider

1. Get your employees back on track by making your plan more effective.  

2. Leverage better insurance plan design to reduce cost without reducing benefits. 

3. Maximize tax‐deferred savings for retiree healthcare needs.

4. Aggressively market your group benefit plans. 

5. Pursue a fiduciary risk mitigation strategy by adjusting your cost sharing strategy.

1. Get your employees back on track by making your plan more effective.

The retirement plan industry has failed to teach or “guide”employees how to save for retirement.

It’s time to take action to affect change.    

Changes that will make an impact

Consider auto‐enrollment with auto‐contribution escalation.

Consider mandatory re‐enrollment to make sure long term participants review their investments or default to better diversified alternatives.

Simplify your investment offering by reducing choices and/or by offering only portfolios or target date investments.  

Engage an advisory firm that will help your participants make better investment decisions that will lead to better outcomes.  

If possible, match your retirement plan to encourage participation and to help participants reach their retirement goals.  

2. Leverage better insurance plan design to reduce cost without reducing benefits

Combining an HRA plan with a high‐deductible medical plan can create significant cost savings

HRA can cover any tax deductible medical expenses (Sec 213) or be limited to cover fewer items (typically some component of the deductible)

Can be offered with plans that do not qualify as “high deductible medical plans.”

Very effective when used alongside a FSA plan

FSA / HRA Design Examplei.e. Health Plan Deductible = $1,000

3. Maximize tax‐deferred savings for retiree healthcare needs

Great way for employees to save for future health care needs at retirement.

Can only have an HSA plan if  you are covered by a high deductible health 

plan (HDHP); 2011 HDHP Minimum Deductible (Single) $1,200 

and (Family) $2,400.   2011 HDHP Maximum out‐of‐pocket (Single) 

$5,950 and (Family) $11,900.

you are not covered by any other first‐dollar medical insurance plan;

you are not enrolled in Medicare; and  you are not claimed as a dependent on 

someone else’s tax return. You are not participating in a traditional FSA 

plan

Health Savings Accounts

You make tax deductible contributions to your account for future medical expenses and your account will grow tax free.   The maximum contribution for 2011 is $3,050 for an 

individual and $6,150 for a family.

If you use your HSA for only eligible medical expenses, you will never pay taxes on HSA savings.  

Unlike FSA and HRA plans, HSA plans are great for Sub‐Chapter S shareholder employees and Partners!

HSA dollars can be used to pay for Long‐term care premiums on a tax preferred basis

4. Aggressively Market your Group Insurance

Insurance should be evaluated every year.  The current carrier should be asked for the plan designs that they believe makes them most competitive. 

Pricing options should take into consideration cost sharing arrangements and any recommendations for change. 

Insurance policies can be changed at any time.  You don’t have to change plans on the renewal date.    

Your healthcare renewal process should begin at least 90 days before your renewal date.  

Renewal should be presented to you no less than 45 days from the renewal date so that you have time to make changes, if necessary.

5. Pursue a fiduciary risk mitigation strategy by adjusting your cost sharing strategy

Consider paying the administrative costs for your retirement plan by increasing the cost sharing of your healthcare plan.  

Lots of new regulatory changes will put plan costs on participant statements in early 2012.

Cost Sharing Example

Current Proposed

Total Heathcare Spend 650,000$            35%

Employer Spend 422,500$             65% 416,250$   64%Employee Portion 227,500$             35% 233,750$   36%

Total Retirement Plan SpendPlan Assets 2,500,000$         Total Participants 60                       

Total Administration Spend for 401(k) 11,750$              

Employer Spend (Admin Fees) 5,500$                  47% 11,750$     100%Employee Spend  (.25% Asset Fee) 6,250$                  53% ‐$            0%

Combined Plan SpendTotal Employer Spend 428,000$             65% 428,000$   65%Total Employee Spend 233,750$             35% 233,750$   35%

Thank you

We appreciate your business and are delighted to be working with you.