Pre-Tax Benefitsfor small businesses

Rep Name

Why Start a Retirement Program?

RETIREMENT

TAX- SAVINGS

CANNOT PREDICT FUTURE, ONLY PREPARE

ATTRACT HIGHER QUALITY EMPLOYEES

RETAIN CURRENT EMPLOYEES

2Revised 1/27/2011

Retirement – a “three-legged” stool

Read the following excerpt from the Social Security Administration’s website:

“Social Security was never meant to be the sole source of income in retirement.”

A comfortable retirement is based on a “three-legged” stool of Social Security, company-sponsored retirement plans and personal savings.

3Revised 1/26/2011

Pre-Tax Growth vs Post-Tax Growth

Number of Years that Money is Invested

Saving $500 per month PRE-TAX*

Saving $500 per month POST-TAX*

10 Years $103,276 $89,993

20 Years $382,848 $281,473

30 Years $1,139,663 $689,419

*Assuming 25% tax rate, 10% rate of return, compounded only monthly 4Revised 1/26/2011

Your Tomorrow Starts Today

Investing early pays off due to compounding interest What is compounding interest?

The process of reinvesting interest to earn additional interest

The more frequent the compounding, the more you earn

The example below shows the difference a head start can make

10 Years 20 Years 29 Years 30 Years

$156,779

$518,801

$1,236,816

$1,354,757

5Revised 1/26/2011

Revised 1/26/20116

7Revised 1/26/2011

Revised 1/26/20118

Attract Top Employees

Studies show that without benefits, outside of acquaintance or luck, a business owner cannot attract the best quality EMPLOYEES

Research shows small businesses need retirement benefits*While some research shows that small business retirement plans are too expensive for their potential customers, a new survey underscores the fact that employers might want to reconsider that notion.

By Editorial Staff While some research shows that owners think small business retirement plans are too expensive, a new survey underscores the fact that employers might want to reconsider that notion.

Fidelity finds that 49% of workers with a retirement plan say the would not take a job with a company that doesn't offer one. 68% percent of employees said that a retirement plan is critical or very important. Just 36% of employers said it was critical or very important to their staff recruitment and retention efforts.

*© 2007 Employee Benefit News and SourceMedia, Inc. 9Revised 1/26/2011

Retain Current Employees

If you’re not offering a retirement plan to your employees, don’t be surprised to lose them to a competitor that does!

Misconceptions about 401(k)s could cost Small Business OwnersBy Lynn Gresham

Forty percent of workers in small companies say they would leave their job for one that provided a 401(k) plan, according to a survey conducted by Harris Interactive and sponsored by ShareBuilder 401(k), a subsidiary of ING Direct. . . .

10Revised 1/26/2011

How Do You Get Money In?

2. Company Match

3. Profit Sharing

1. Salary Deferrals

11Revised 1/26/2011

How Can You Maximize Your 401(k)?

12Revised 1/26/2011

Your 401(k) plan, easy as 1-2-3

3 Simple decisions to start your plan

today

Eligibility

Money Manager

Optional Match/Vesting

13

Revised 1/26/2011

Possible EmployerMatching/Vesting Contributions

Matching Options

Employer Matching

Contribution

Not to exceed this percentage

of salary

Employer’s maximum Matching

Percentage

1

100% 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%

14Revised 1/26/2011

IRS/DOL

Money Manager

Participants

Employer

Payroll Bank

Record Keeper

Non-Paychex 401(k) Paradigm

15Revised 1/26/2011

The Paychex Advantage:A Seamless Flow of Contributions

Client Paychex

InvestmentProvider

Power of Paychex Integrated 401(k)

16Revised 1/26/2011

What Paychex Does For You

Required Legal Documents Adoption Agreement Plan document Summary Plan Description

Preparation of Form 5500 Preparation of Forms 1099-R and 945 Quarterly IRS nondiscrimination testing Quarterly management reports Quarterly participant statements Daily valuation of account balances Account access via participant website and automated phone system Toll-free phone support Loan modeling and administration Roth option Discretionary profit sharing plan Deferral calculations for pre-tax and Roth Electronic recordkeeping and fund transfer each pay period Payroll integration of employee and employer contributions and census data Enrollment meeting and enrollment kits Automatic enrollment 17

Revised 1/26/2011

Money Manager Options

18Revised 1/26/2011

Small BusinessFlexible Spending Accounts

What is a Flexible Spending Account?(FSA)

It’s part of the IRS tax code: Section 125 Allows employees to take certain out-of-

pocket expenses on a pre-tax, rather than a post-tax basis: Medical Dental Vision Over-the-counter items

• With a Dr’s Prescription

Dependent Care

20Revised 1/26/2011

Benefits of an FSA

Employee: Federal Income Tax

Savings Tax savings on FICA State Tax Savings

Employer:

Savings on FICA tax

Workers’ Comp Savings (CA only)

APPROX. 12% SAVINGS ON PAYROLL TAXES

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

21Revised 1/26/2011

FSA has 3 “buckets”

Plan Features

1) Insurance premiums

3) Out-of-pocket medical, dental, vision, and over-the-

counter expenses

2) Dependent Care expenses

22Revised 1/26/2011

What Paychex Does For You

Required legal documents and plan changes Regular non-discrimination testing Enrollment meeting and enrollment materials Payroll integration (payroll clients only) Participant website and toll-free support Employer and employee status reports FSA Debit card Weekly claim processing Direct deposit of reimbursements Discretionary employer contributions allowable

through employer funded FSA

23Revised 1/26/2011