HR Specialty Products & Services Catalogue Executive Summary

1. Actuarially Derived Cafeteria Plan to Further Increase Both Employee Pay and Employer Earnings HR Specialty Products & Services Catalogue Executive Summary A No Frills Distillation of Vendor’s Marketing Collateral Thomas A Ference President & CEO Human Resources Mining & Distribution Co Locating, Validating and Accelerating HR  Innovation Office: 219-662-0201 Cell: 630-240-2583 Fax: 219-661-0236 e-mail: tference@hrmdco.com Website: www.hrmdco.com

2. IRC Sections 105 and 213 allow for an actuarially-estimated or “defined benefit” to be used as the basis for the employees pre-tax contributions to an IRC Section 125 Cafeteria Planbut these provisions have not heretofore been used • This IRS scrutinized and attorney-sanctioned next generation flex plan uses actuarial estimates as the basis for the employee pre-tax contributions to save both the employer and employee on income taxes and the employer $250-$300 / employee / year less in payroll taxes beyond simplistic Section 125 • As only the actual expenses are ultimately deductible by the employee, there needs to be a year end true-up to actual expenses incurred vs. beginning of the year actuarially estimated with the difference being taxable income to the employee • However, upon enrollment , employees are offered and optional contractually structured transfer of tax liability to a third party, such that there is ultimately no income tax burden for the employee Actuarially Derived Cafeteria Plan to Further Increase Both Employee Pay and Employer Earnings

3. Plan administrator handles the actuarial calculations, payroll calculations and interfaces and accepts third party transfer of employees’ tax liability if employee so agrees (most do, of course) • Administrator retains a fee for its expenses and profits that is paid for from the actuarially estimated premiums and the net premium gets added back to employees’ paychecks. • It is important to recognize that the Administrator’s fee is in essence its due portion of the shared tax savings generated by the Plan, as outlined in the Plan’s Master Agreement. Therefore, per IRC Section 162, the admin fee is a corporate income tax deduction. Actuarially Derived Cafeteria Plan to Further Increase Both Employee Pay and Employer Earnings

4. Assume a $50,000/ Year Employee , Married with 1 Deps

5. Employer Example- Assume 2800 Employees

6. This product/service is contained in the HR Specialty Products & Services Catalogue™ • Operational level details about this particular service provider can be obtained in conference with the vendor • The HR Mining &Distribution Co. is an independent and contracted representative of the vendor • Upon your request, we will arrange for an introduction that can range from a simple, quick conference call to a services overview / system demo • Tom Ference 219-662-0201 (Chicagoland area) or tference@hrmdco.com • Thank you for your potential interest in this fresh thinking Next Steps