The information contained in this tutorial is confidential and intended for the training and education of Colonial Life & Accident Insurance Company employees and benefit counselors (insurance producers in WA) only. Colonial Life has not authorized any other use of this information. Do not give or show it to prospective insureds, employers of prospective insureds, other insurance carrier representatives, worksite marketing competitors, or anyone else not employed by or contracted with Colonial Life & Accident Insurance Company or other Unum Group business units.

Benefits Landscape:Fitting the Pieces Together

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By taking this tutorial, you will be able to effectively position our company’s voluntary benefits to a decision maker because you will understand the benefits landscape, which means to you, you will be prepared to discuss Colonial Life’s role in the marketplace, and the real benefit to you is that you’ll feel confident that you are delivering the best benefits solutions to working Americans.

Employer-Offered Core Benefits

Flexible Benefits Plans (Section 125)

Understanding and Positioning Our Products

Need for Voluntary Benefits

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How does Colonial Life fit within the benefits landscape?

Benefits Landscape

Tip : Click on the puzzle piece to go to that lesson!

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Based on a simple concept: While you work, you pay taxes into the Social Security system, and when you retire or become disabled, you, your spouse and your dependent children receive monthly benefits that are based on your reported earnings.

Also, your survivors can collect benefits if you die.

Reference: Social Security Online. http://www.ssa.gov/glossary.htm#S Accessed 10-6-2011.

Social Security

Benefits Landscape

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Social Security• Mandatory• Employer pay FICA taxes of 7.65%• Employee pay FICA taxes of 7.65%

Benefits Landscape

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Drawbacks• Individual must wait 5 months to apply for Social Security

disability• Doctor must state that you will be out for at least one year or

that you will die within the first year• Typically requires several hearings before approval

Jim, 43, has worked for seven years in a factory. He is a father and a husband. It’s winter, and the sidewalks are covered in ice.

Social Security ScenarioBenefits Landscape

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One day, Jim was walking outside and loses his balance. He falls and injures his back. After being rushed to the emergency room, doctors performed surgery on his ruptured discs.

Due to his injury, Jim is unable to work. After waiting six months, his social security claim has been denied. Jim and his wife will now have to exhaust their life savings and or borrow from family and friends to make ends meet.

What do we offer that could help employers and employees with similar situations?

Social SecurityBenefits Landscape

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Voluntary Accident and Disability• Cover employees’ accidents that happen on- and or off-the-job• Pay directly to the insured

It usually takes close to _____ to begin receiving Social Security payments.

Lesson Quiz

Benefits Landscape

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12 days

5 months

6 months

12 months

To qualify for Social Security, a doctor must state that you will be out for at least ______ or that you will die within the first year.

Lesson Quiz

Benefits Landscape

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14 days

5 months

6 months

1 year

A government-mandated program that provides compensation and medical expense payments to employees and their dependents if the employee suffers a job-related illness, injury or death.

Employers in most states are required to pay premiums to fund these programs.

Workers’ Compensation only pays workers who are injured on the job, and it does not cover unemployment.

Reference: “Workers’ Compensation.” Accessed 10-20-11. http://www.investopedia.com/terms/w/workers-compensation.asp#axzz1bLb7pW7a

Workers’Compensation

Benefits Landscape

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Workers’ Compensation• Mandatory but can vary by state• Paid 100% by the employer• Pays 100% of medical bills if injury is

related to the job• Pays up to 2/3 of income with a state-

specific maximum amount• Limited by state specific elimination

periods• Determines premiums based on industry

rating and claims experience

Benefits Landscape

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Karen is a 36-year-old single mother of three. On a family vacation, Karen goes skiing down a steep slope. She loses her balance and severely injures her back.

Workers’ Compensation ScenarioBenefits Landscape

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She’s due back to work on Monday. She knows that if she is out of work she won’t receive a paycheck, and since this injury happened while off-the-job, she won’t be compensated. As a single mother, she worries that any additional medical bills will jeopardize their family’s financial situation. She decides not to go to the doctor, knowing she can’t afford to pay for the treatment.

On Monday, Karen goes into work, still in pain. She claims to have slipped on ice while at work, and tells her employer Timothy. Immediately she goes to the emergency room for treatment.

Timothy sits in his office, concerned. He knows that since Karen has claimed her injury happened while at work, it is considered a workers’ compensation claim. Furthermore, she is the third employee this year to file for workers’ compensation on a Monday morning.

DisadvantagesFor the Employer For the Employee

Premiums may be high because of the nature of the employer’s business as the costs are based on the employer’s accident record

Administering workers’ compensation can be difficult, with requirements such as a state-specific wait period that pays retroactively to day one, and as a result it can encourage employees to stay out of work longer

Paperwork burden for the employer is increased because of requirements to file accidents with state authorities

Social Security disability benefits can offset workers’ compensation benefits in some states

Defending fraudulent or frivolous claims can take time and money

Benefits Landscape

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What do we offer that could help employers and employees with similar situations?

Workers’ CompensationBenefits Landscape

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Voluntary Accident and Disability• Covers employees’ accidents that happen off-the-job

– Off-the-job coverage is not provided with Workers’ Compensation

• Helps minimize Workers’ Compensation rate for the employer

Workers’ Compensation pays 100% of medical bills if the injury is __________.

Lesson Quiz

Benefits Landscape

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An accident

Off-the-job

Job-related

Employer’s fault

Workers’ Compensation pays up to 2/3 of income. Both the percentages and maximums are __________.

Lesson Quiz

Benefits Landscape

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State-specific

Equal

Employer-specific

Employee-determined

For Workers’ Compensation, there are state-specific elimination periods.

Lesson Quiz

Benefits Landscape

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True

False

Workers’ Compensation can be retroactive to day one if the employee is out of work for a state-specified number of days.

Lesson Quiz

Benefits Landscape

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True

False

A type of health expense insurance that is designed to pay a certain percentage (such as 80 percent) of hospital, surgical, and medical bills.

MajorMedical

Definitions:

• Co-insurance

• Co-pay

• Deductible

• COBRA

• HMO

• PPO

• POS

• Maximum out-of-pocket expense

Benefits Landscape

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Major Medical• Voluntary• Has a lifetime maximum for

each policy• Range of deductibles• Carries co-insurance• Comes in these forms:

– HMO – PPO – POS

Benefits Landscape

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Major Medical Common Features

• Co-insurance – varies by state

• Deductibles – range from $250-$5,000, if not more

• Out-of-pocket maximums

• Portability through COBRA for 18 months after termination*

* “Health Plans and Benefits.” United States Department of Labor. Accessed 10-24-11. http://www.dol.gov/dol/topic/health-plans/cobra.htm

Benefits Landscape

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Stacey, a wife and mother of two, has been admitted into the hospital. An oncologist informs her that she has cancer and will need immediate treatment. Two months later, Stacey has already incurred $20,000 of medical expenses. Her coworkers at the dentist office she’s worked at for ten years had a fundraiser to help pay for some of her medical expenses.

Major Medical ScenarioBenefits Landscape

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Medical Expenses $ 20,000Deductible (which insured is responsible for) 2,500Co-insurance (20% - which insured is responsible for) 3,500

Maximum out-of-pocket 10,000Remaining Expenses (covered by the major medical plan) $ 14,000

Even though she has major medical coverage and her coworkers had a fundraiser, Stacey and her family still struggle to maintain their lifestyle due to the numerous medical expenses and other out-of-pocket costs related to her cancer treatments.

What do we offer that could help employers and employees with similar expenses?

Major MedicalBenefits Landscape

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Voluntary Hospital Confinement• Pays cash which can offset the deductible and out-of-pocket medical and

non-medical expenses• Gives employers more options with the costs of medical benefits• Gives employers greater control of the rising costs of medical coverage

Voluntary Catastrophic Illness• Helps employees deal with out-of-pocket expenses associated with

catastrophic illnesses such as cancer

Major medical comes in the form of __________, __________, and ________ plans.

Lesson Quiz

Benefits Landscape

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Core benefits, voluntary benefits, and flexible benefits

PPOs, Health Savings Accounts, and Flexible Spending Accounts

Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and Point-of-Service Plans (POS)

Dental, Vision, and Health Maintenance Organizations

Major medical plans are portable through __________ for 18 months after termination of employment.

Lesson Quiz

Benefits Landscape

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COBRA

ERISA

Colonial Life

Aflac

A type of insurance coverage offered to a group of people.

This coverage will provide a benefit to the beneficiaries if the covered individual dies during the defined covered period.

Reference: http://www.investopedia.com/terms/g/group-term-life-insurance.asp#axzz1a0sk7kfJ Investopedia. “Group Term Life Insurance.” Accessed 10-6-2011.

Group Term Life

Benefits Landscape

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Group Term Life Insurance• Voluntary• One to three -year

renewable policy• Not portable• Participation requirements• Benefit amounts based on

earnings, position and occupation or flat benefit

• Usually includes a waiver-of-premium provision

• May offer a tax advantage

Benefits Landscape

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Definitions:• Renewable• Waiver of premium

Allentown Memorial Hospital offers its 150 employees a group term life policy.

• Term life policy: does not build cash value

• Provides protection for employees only

• Pays $10,000 death benefit to beneficiary

• Not portable

Group Term Life ScenarioBenefits Landscape

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What do we offer that could help employers and employees with similar expenses?

Group Term LifeBenefits Landscape

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Voluntary Life • Supplements an employer’s existing group term life program by

providing affordable life coverage• Spouses and dependents can be covered, not just employees• No participation requirements • No cost to the employer• Voluntary products are also portable

The typical group term life policy is a ______ renewable policy with no cash accumulation feature. It provides protection only.

Lesson Quiz

Benefits Landscape

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14 days

5 months

6 months

1 year

Group term life policies cover employees only.

Lesson Quiz

Benefits Landscape

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True

False

Replaces wages lost as the result of a non-occupational, disabling accident or sickness.

Reference: Positioning Products with the Employer –Instructor Guide. 1/2006.

Group Long Term

Disability

Benefits Landscape

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Group Long-Term DisabilityHow it differs from short-term disability• Elimination period• Duration of the benefit period which

may be 5 or 10 years or to age 65• A more restrictive definition of

disability

Definitions:• Elimination period• Short-term disability• Long-term disability

Benefits Landscape

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Other typical characteristics• Voluntary• Not portable• 6 months is most common

elimination period• Benefits range from 40-66 2/3% of

employee’s pre-disability gross salary

Tyler, 28, is an engineer and sole provider for his family. One day he was driving when he was badly injured in a car accident. Paramedics flew him to a hospital, where he underwent several surgeries.

Group Long-Term Disability ScenarioBenefits Landscape

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The doctors advised Tyler not to return to work for at least three months.

In the meantime, Tyler and his family will need to rely on their life savings and or borrow from family and friends to make ends meet.

What do we offer that could help employers and employees in a similar situation?

Group Long Term DisabilityBenefits Landscape

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Voluntary Income Protection• Helps employees protect their paycheck• Replaces a portion of income to offset financial losses• Helps cover everyday living expenses such as house payment,

car payment, light bill and lunch money for the kids

With Group Long-Term Disability, an elimination period is a period for which no benefits are payable for __________ .

Lesson Quiz

Benefits Landscape

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1 month or less

1 month or more

2 months or more

3 months or more

The definition of disability for long-term coverage differs from _____ and from _____.

Lesson Quiz

Benefits Landscape

This question has multiple correct answers.

Select all that apply.

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State to state

Person to person

Employer to employer

Insurer to insurer

Group Long Term Disability is portable.

Lesson Quiz

Benefits Landscape

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True

False

Typically Group Long Term Disability can have a 3-month, 6-month or 1-year elimination period. _______ months is most common.

Lesson Quiz

Benefits Landscape

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1

3

6

None of the above

Flexible Benefits Plans (Section 125)• Employees have more

choices in benefit options

• Allows employers to offer benefit options of qualified benefits on a pre-tax basis

Benefits Landscape

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Flexible Benefits Plan Overview

Section 105URM FSA

Premium Only Plan (POP)

Allows employees to pre-tax premiums for qualified insurance

premium

Unreimbursed Medical FSA

Allows employees to set aside pre-tax dollars to pay for qualified out-

of-pocket health care expenses

Dependent Care FSA

Allows employees to set aside pre-tax dollars

to pay for qualified dependent day care and other qualified

dependent care expenses

Benefits Landscape

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Communicating the Concept of Pre-taxing

Decision Maker Script

Flex Plan Supplemental Form

Ameriflex ePOP Online Application

Benefits Landscape

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Payroll TaxesCommunicating the Concept of Pre-taxing

Employer Employee

FICA 7.65% 7.65%

Federal Varies by individual

State Varies by State

FUTA Varies by Individual

SUTA Varies by State

Benefits Landscape

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Without a POP With a POPSalary (Gross Pay based

on 24 pay periods) $1,000 $1,000

Taxes -$202.02 -

Insurance - -$180

$797.98 $820

Taxes - -$156.30

Insurance -$180 -

Spendable Income $617.98 $663.70

Win for the Employee:Communicating the Concept of Pre-taxing

+$45.72

Benefits Landscape

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Communicating the Concept of Pre-taxing

How much do employers really save?*

$ 500 Employee’s insurance cost (deducted from

payroll)X 12 months

$ 6,000 Employee’s payroll deduction per year

X 7.65% FICA taxes

$ 459 Annual employer savings per employee

*This is just an example. Savings may vary by state.

Company Size Annual Tax Savings

5 employees $ 2,295

10 4,590

15 6,885

20 9,180

35 16,065

50 $ 22,950

Benefits Landscape

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Win for the EmployerCommunicating the Concept of Pre-taxing

Without POP With POP

Annual payroll $500,000 $500,000

Pre-tax Benefits $0 $30,000

Taxable Payroll $500,000 $470,000

7.65% FICA $38,250 $35,955

Savings $0 $2,295

Benefits Landscape

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What are three distinct advantages to an employer to using a Premium Only Plan?

Lesson Quiz

Benefits Landscape

This question has multiple correct answers. Select all that apply.

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Employees’ taxable income will be reduced, thereby reducing employers’ share of FICA taxes

Employers may benefit from employee retentionEmployers may benefit from expanded employee benefits

Core Benefits ConclusionBenefits Landscape

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The Need for Voluntary BenefitsBenefits Landscape

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The Need for Voluntary BenefitsBenefits Landscape

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What are Voluntary Benefits?• Insurance offered in addition to an employer’s core benefits• The employee gets to select their benefits and is paid directly

Benefits Landscape

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• Flexibility in using claim payments• Portability• Intact coverage• Continued convenience• Pays benefits directly to policyholders

Advantages of Voluntary Benefits

Benefits Landscape

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What do employers gain from voluntary benefits?

Lesson Quiz

Benefits Landscape

This question has multiple correct answers. Select all that apply.

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Reduced pressure to spend more on employee benefits

Expanded benefits programs at no direct cost-and without reallocating benefits dollars from one area of benefits and compensation to another

Improved morale and employee relations

Better employee attraction and retention

Product Portfolio2010 Distribution of Sales by Product Line

Accident21%

Disability31%

Life18%

Special Risk (Catastrophic Ill-

ness)16%

Supplemental Health (Hospital Confinement)

14%

Benefits Landscape

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Product Lines

Product Portfolio Overview

Benefits Landscape

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