Strategic Benefit Planning for an Aging Workforce Trisha Gibo, Esq. Ryan Loeffers, Esq. April 6, 2016

Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

EMPLOYEE DEMOGRAPHICS Traditionalists/Silents Born prior to 1946 Ages 71 or older Baby Boomers Born 1946-1964 Ages 52 – 70 * Based on statistics collected by Pew Research Center Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

Increased Expected Retirement Age AGING WORKFORCE Increased Expected Retirement Age Financial constraints Inability to “downshift” into retirement Lack of personal support system Multiple dependents (adult children & aging parents) High healthcare costs Traditionalists (less than 4% of workforce) Born prior to 1946 (Ages 67 or older) Baby Boomers (39.8% of workforce*) Born 1946-1964 (Ages 48 – 66) Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

Increased health concerns IMPACT ON EMPLOYERS Increased health concerns Physical impairments Impact of brain related injuries/illnesses Increased absenteeism Statutory Leaves (FMLA, HFLL, disability leave) Extended Medical Leaves of Absence Prevalence of disabilities Employee’s unable to perform essential functions of the job Unreasonable to provide accommodations Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

Benefit Plan Tools for Transitioning Aging and Disabled Employees Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

LEAVE OF ABSENCE & MEDICAL COVERAGE Medical leave of absence Paid leave (vacation, sick, PTO) Unpaid leave under company policies Continued medical coverage Hawaii Prepaid Healthcare Act Coverage for at least 3 months after the month in which disability begins Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

TEMPORARY DISABILITY INSURANCE (TDI) Requirement by Hawaii Statute Wage replacement for non-work related injuries or illness Eligibility Worked in Hawaii for least 14 weeks Paid at least 20 hours and $400 in the 52 weeks preceding first day of disability Currently Employed Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

TEMPORARY DISABILITY INSURANCE (TDI) Benefits for statutory plans 7 day wait period 58% of employee’s average weekly wages (up to maximum) Maximum benefit period of 26 weeks Paid leave Supplement TDI benefit (if allowed under company policies) Continue medical insurance coverage for employee Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

CAFETERIA PLANS Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

CAFETERIA PLANS: LONG TERM DISABILITY INSURANCE (LTDI) Relatively cheap “rider” insurance plan Provides continued wage replacement Effective after TDI benefits are exhausted Apply for coverage before TDI benefits end Eligibility Physician certification of total disability Must be unable to return to work Currently employed Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

CAFETERIA PLANS: LONG TERM DISABILITY INSURANCE (LTDI) Benefits Waiting period varies Commonly 90-180 days Percentage of wage replacement Generally 60% of base wages Duration of benefit Able to return to work or social security retirement age Continue medical insurance coverage for employee Supplement with paid leave Wait period or LTDI benefits (if allowed by policy) Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

CAFETERIA PLANS: LONG TERM DISABILITY INSURANCE (LTDI) Offered through an IRC Section 125 Cafeteria Plan Will be an ERISA plan that requires: Plan Document Summary Plan Description Can allow employer and employee contributions Insurance can be paid for with pre-tax dollars Can contract with a service provider to: Draft required ERISA documents Administer the Plan Educate your employees Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

CAFETERIA PLANS: OTHER OPTIONAL BENEFITS Other specialized benefits that can be provided through your Section 125 Cafeteria Plan: Cancer Insurance Accident Insurance Hospitalization Insurance Health Savings Account Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

RETIREMENT PLANS Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

RETIREMENT PLANS - OVERVIEW Governed by federal tax law Failure to follow the law will “disqualify” the plan Loss of tax-exempt status Generally cannot distribute benefits prior to “normal retirement age” Exceptions: Permanent disability Early retirement with reduced benefits Law allows but does not mandate the exceptions Exceptions must be written into your retirement plan document Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

RETIREMENT PLANS – DISABILITY RETIREMENT Employee is able to reach their retirement benefits if they become permanently disabled Employee is required to exit the workforce Plan should also define “disability” Combine with Social Security Disability benefits Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

RETIREMENT PLANS – EARLY RETIREMENT Employee is at least age 55 and has severance from employment Reduced monthly benefit may be concern for employees Employee may not qualify for Social Security Disability Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

“Normal Retirement Age” is generally age 65 Retirement Plans – Lowering Your "Normal Retirement Age" (Certain Industries Only) “Normal Retirement Age” is generally age 65 IRS regulations define “Normal Retirement Age” as “[the] age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.” Common to have a lower “Normal Retirement Age” for physically intensive professions i.e., construction industry Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

NON EMPLOYMENT CONSIDERATIONS Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

SOCIAL SECURITY DISABILITY INSURANCE (SSDI) Effective after other insurance benefits end Application Via phone or online through Social Security Administration Apply before insurance benefits lapse Eligibility: Total disability: medical condition that is expected to last at least one year or result in death Meet earnings requirement based on age or number of years worked https://www.ssa.gov/planners/disability/ Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

NON-EMPLOYMENT CONSIDERATIONS Connecting with family members Reach out ask for help to transition the employee out of work and into retirement Helping former employees feel valuable in the community Develop relationships with local non-profits or community groups that can utilize elderly volunteers Connect former employees with non-profits to stay active, develop new relationships, and feel valuable Connect former employees to retiree groups Unionized employees frequently have retiree groups established through their union Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

NON-EMPLOYMENT CONSIDERATIONS Disabled employees with no support system Contact Adult Protective Services to assist with finding former employee long-term care Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019

ANY QUESTIONS? If you have any follow up questions, email us at aes@esandalaw.com tgibo@esandalaw.com rloeffers@esandalaw.com For access to these materials, email bdasilva@esandalaw.com Please visit our website for more resources: www.esandalaw.com Our next webinar will be on May 4, 2016 Topic to be determined – stay tuned! Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary January 18, 2019