Year end procedures for 1995.






       December 20, 1995


       Dear Client,

       As part of our continuing commitment to our clients we are enclosing this memo
       reviewing the 1995 end of calendar year procedures.

       W2 Changes and Year End Payroll Procedures
       __________________________________________

       These procedures are outlined in Appendix A attached to this letter and must
       be completed before 1996 payroll information can be entered.
       F

       RHS will contact you after you complete the 1995 payroll as per the dates that
       were given to client services this month. All facilities that are equipped
       with modems should leave their modems on starting from the dates that they
       gave to RHS. All facilities with modems will be handled via telephone.


       Payroll Accruals Carryover
       __________________________

       Clients using our payroll accrual software should follow the steps outlined in
       Appendix B.
       These procedures can be completed either before the Payroll year end
       procedures are done or at a later point in time.

       F1996 Co-Insurance Rate
       ______________________

       Please update the Co-Insurance Table for 1996 adding an entry with a Main Key
       - 96 and a Secondary Key - 1996  [TF, 1, 8, 7]. The Co-Insurance rate for 1996
       is $92.00.

       Medicare Rugs III Demonstration Project
       _______________________________________

       For those clients participating in the Medicare Rugs III Demonstration project
       additional instructions and software updates will be mailed in early January
       1996.

       UNIX Systems
       ____________

       For UNIX system only - an annual backup of your entire system MUST be made.
                                                                     ____
       Instructions are enclosed.
       
       For additional assistance please feel free to call our client services
       department. Thank you.


       Reliable Health Systems, Inc.

       Doc. 0229w



       APPENDIX A
       __________

                         Payroll Year End Procedure (Year End 1995)
                         __________________________________________

       Step 1:      VERIFY W2 INFORMATION
                    _____________________
       

       Check Earning/Deduction Table File to Ensure that:
       
        a) All items have the correct tax status.
           "Y" = include this entry when calculating this tax.
                             Standard Table File entries are:
                             Earnings         - All Taxes
                             Deductions      - No Taxes
                             Qualified Plan  - All Taxes except FICA
        b) Code 61 exists for 3rd Party Pay

       Check with your accountant if any fringe benefits or deferred compensation
       amounts are applicable to your facility. If they are - then make sure that an
       entry for this item exists in the Earning/Deduction Table File so that the
       W2's are correct.  These amounts should be entered in the 1995 payroll prior
       to printing the W2's and Quarterly reports.

       If your Facility has any of the following pension plans then you must check
       the Earning/Deduction Payroll Table Files to ensure that:

                             ___________________
                    1) A "Y" has been entered for Deferred Compensation
                    2) The correct code was entered in the field Box 17 for w2
                             Code        Pension Plan
                             ____        ____________
                             04          401(k)
                             05          403(b)
                             06          408(k)
                             07          section 457 plan
                             08          501(c)(18)(D)
                             12          other non qualified plan
                    3) SUTA/FUTA         N N
                    4) Tax Status        Y N Y Y Y Y
                                         See Appendix C for a detailed screen.
       
       Check Employee Master File for Correct:
       
        a) Social Security number (no blanks or all zeroes)
        b) Marital Status
        c) Number of exemptions
        You can printout these items by running the Employee Master Report Generator
       (GM,10,9,4) requesting fields:

                    8 (Soc-Sec-No)
                    10 (Martial Status)
                    58 (Fed exempt)
                    59 (State exempt)
                    60 (City exempt)

                    BACKUP and REORGANIZE
                    _____________________
           Create a backup after all Payroll entries for the year have been
           completed, including voids, prepaids and 3rd party checks. This backup
                                                     __
           should be stored  away and taken out of the backup rotation.
       1995 checks may be voided in 1996, prior to printing the W2's, if the complete
                                          __________________________
       1995 payroll is on-line.
       F

       Call RHS for assistance in doing Steps 2 through 6.:
       Instructions for Steps 2 through 6 are for Wang VS Systems ONLY.
                                                  ____________________
       
       Step 2:
       Facilities with limited disk space should make space by
                  _______________________
         a) deleting 1994-and-prior payroll data (After backing up data)
         b) run "UPDTFL" to delete free extents
                 ______
         c) run "VOLORG" to compress files, changing all from ranges from 1 to 0
                 ______

       Step 3:      CREATING A LOGON
                    ________________
                    This step allows access to the prior year payroll
       From any CHARTS menu
        Enter "TF"  (RETURN)
               __
        Type  "1" (ADDTABLE), "18" (SYSTEM), "1" (CLIENT).               _               __             _
        Main KEY: ("95TESTDA" if original name is "TESTDATA") 2nd Key: "95"  (RETURN)
        Enter the Library name and Volume of the 95 payroll.

       Step 4:      SEPARATING CURRENT PAYROLL
                    __________________________
           The following steps should be done for every payroll facility
        Log off CHARTS by pressing HELP and PF16
        Press PF1, type "COPYMANY" for Program name and press RETURN
                         ________
        INLIB: Payroll library (Press HELP, PF5, use INPUT library and Volume) to
       find the names of the Payroll library
        INVOL: Payroll volume,  OUTLIB & OUTVOL - from step 3

           Facilities with payroll spanning 2 years for accruals or facilities with
                                                                 __
           limited disk capacity should place an "X" by TXFILE and NHHRF.  All other
                                                  _
           facilities with sufficient disk space should put an "X" by SPFILE, DEFILE,
                                                                _
           EMFILE, TXFILE, TFFILE (or TABLES) and NHHRF.  Press PF1.
       Press PF16 to exit.

       Logon to CHARTS.
       Facilities without payroll spanning 2 years for accruals
       Enter from any CHARTS menu "PMOVEFIL" and press RETURN
                                   ________
       From file: "EHFILE", To library: from step 3.
                   ______
                    Log off and log back on.

       Step 5:      CHANGING FILE NAMES
                    ___________________
                    From any CHARTS menu enter the MAIN KEY from step 3 and press
           RETURN.  Type "NHBASIC" and press RETURN.  Change any of the last 17
                          _______
           positions in the facility's name to reflect 95 (i.e. TESTSNF            -
           95)
         If in step 4 TFFILE was copied, change the library and volume for TF to the
       OUTLIB and OUTVOL in step 3 and press RETURN
         From any menu type in "NHPR" and press RETURN.  The copied and moved files
                                ____
       from step 4 should have their libraries and volumes changed here then Press
       RETURN.

       Step 6:      INITIALIZING EMPLOYEE WORK FILE
                    _______________________________
                    Facilities using 2 years for accruals go to step 7
       From any CHARTS menu enter the INLIB of step 2 (to change facilities) (RETURN)
       Type in "RUN"   (RETURN)
                ___
       Program: "INITFILE" (RETURN)  Leave the N to the question INIT THE NHHRF
                 ________
       Facilities with sufficient disk space, on line 11 for No. of Recds enter the
       number of employees multiplied by the number of Payrolls.  Other facilities
       use 5 times the number of employees
       Press PF11.  Enter "I" (to initialize) (RETURN)
                           _
       Some facilities will be prompted to press PF3
       When only the I appears  - press PF16 to exit.


       Step 7:      SETTING PAYROLL PERIODS FOR 1996
                    _______________________________
                    From any CHARTS Menu enter "SETPR" and press RETURN.  Enter the
                                                _____
           first period of the new year.  Set beginning Month, Quarter, Year to "B".
                                                                                 _


       Step 8:      CHANGING TAX TABLE

                    __________________
                    From any CHARTS menu enter "FEDTAX" and press RETURN.  Change the
                                                ______
           TAX table as shown: (For wages paid after Dec'95)
       7
        ________________________________________________________________________
        (IRS CIR E   ANNUAL)             FEDERAL TAX INFORMATION
                                     Single                       Married
                                 Rate     Cutoff              Rate     Cutoff
         level       - 1        15          2625.00          15.00       6425.00
                     - 2        28         25450.00          28         44250.00
                     - 3        31         53725.00          31         89675.00
                     - 4        36        122750.00          36        151850.00
                     - 5        39.60     265200.00          39.60     267900.00
                     - 6
                     - 7
        Annual Exemption                  2550.00                      2550.00
                                           -- Earned Income Credit --
         Level       - 1         6330       20.40            3165        20.40
                     - 2        11610     1291.00            5805       646.00
                     - 3        .00       .00                .00       .00

        Min/Max      Rates      .00       9.59               .00       9.59

        Fica  Employer: 7.65  62700.00      Employee:  7.65   62700.00
              Level 2 : 1.45 999999.00      Level 2 :  1.45  999999.00


       
                     Please note changes in FICA limits
       



       APPENDIX B
       __________

                             Payroll Accruals Year End - Part A
                             __________________________________


       Notes:   On running carryovers when 1995 data is still live.
                __________________________________________________


       BEFORE STARTING
       _______________

       A) A BACKUP MUST BE DONE AND STORED AWAY.
          _____________________________________

       B) A BENEFITS REPORT MUST BE RUN FOR 1995, AND THE RESULTS SHOULD BE REVIEWED.
          ___________________________________________________________________________


       Step 1.  Change User Parameter PR Screen - Type NHPR (CR)

                Enter in the Percentage allowed to be carried over for Sick and
                Vacation.
                                                             Sick      Vacation
                                                             ____      ________
                On the % Payout/Carryover line type  xxxxx  100.00  xxxxxx  100.00
                                                     _____  ______  ______  ______

                Press RETURN

       Step 2.  Running the Accrual Update Program
                Run Update Vac/Sick/Hol Info (GM,18,4,1,7)
                                              ___________

                Fill in the screen:

                Processing Order: D

                From Department: 0000.0000   to   9999.9999

                From Date: MM/DD/YY (beg of year) to MM/DD/YY (end of year)

                Vacation:   (enter "Y" if you are carrying over vacation)
                          _
                Sick    :   (enter "Y" if you are carrying over sick)
                          _
                Holiday :   (enter "Y" if you are carrying over holiday)
                          _

                Detail/Summary/Both: "X" (This Must Be Entered.)
                                      _

                Print Terminated Employees: "Y"
                                             _

                Print Option:   Spool or Printer default
                              _

                The remaining questions on the screen can be left as prompted.

                Press RETURN.

                The processing can take up to 1 to 2 hours, depending on the CPU type
                and the amount of employee history records on file.


       Step 3.  Run an Accrued Benefits Report to verify that the information is
                correct.


       Accrual Memo - Year End 1995 - Part B
       _____________________________________

       Notes:       On running carryovers when 1995 Data has been moved to a
                                          _____________________________
                    different library.
                    For our Example we are assuming TESTDATA is the 1996 Library name
                    and 95TESTDA is the 1995 Library name.

       BEFORE STARTING
       _______________
       A) A BACKUP MUST BE DONE AND STORED AWAY.
          _____________________________________
       B) A BENEFITS REPORT MUST BE RUN FOR 1995, AND THE RESULTS SHOULD BE REVIEWED.
          ___________________________________________________________________________

       Step 1.      Logon to the 1995 Facility (containing las year information)

       Step 2.      Change User Parameter PR Screen - Type NHPR (CR)

                    Enter in the Percentage allowed to be carried over for Sick and
                    Vacation.
                                                                Sick    Vacation
                                                                ____    ________
                    On the % Payout/Carryover line type  xxxxx  100.00  xxxxxx   100.00
                                                         _____  ______  ______   ______


                    Change the pointer to the EMfile - EMFILE TESTDATA VOLXXX
                    Change the pointer to the DEfile - DEFILE TESTDATA VOLXXX

                    Leave the remaining files pointing to 95TESTDA as before.

                    What we are doing is updating the current EM and DE files from the
                    1995 Employee History data.

                    Press RETURN

       Step 3.      Running the Accrual Update Program
                    Run Update Vac/Sick/Hol Info (GM,18,4,1,7)
                                                  ___________

                    Fill in the screen:

                    Processing Order: D

                    From Department: 0000.0000   to   9999.9999

                    From Date: MM/DD/YY (beg of year) to MM/DD/YY (end of year)

                    Vacation:   (enter "Y" if you are carrying over vacation)
                              _
                    Sick    :   (enter "Y" if you are carrying over sick)
                              _
                    Holiday :   (enter "Y" if you are carrying over holiday)
                              _

                    Detail/Summary/Both: "X" (This Must Be Entered.)
                                          _

                    Print Terminated Employees: "Y"
                                                 _

                    Print Option:   Spool or Printer default
                                  _

                    Defaults can be used for the remaining questions on the screen.

                    Press RETURN.

                    The processing can take up to 1 to 2 hours, depending on the CPU type
                    and the amount of employee history records on file.




       Step 4.      Change User Parameter PR Screen - Type NHPR (CR)

                    Change back the pointer for the EMfile to EMFILE 95TESTDA volxxx
                    Change back the pointer for the DEfile to DEFILE 95TESTDA volxxx

                    Leave the remaining files pointing to 95TESTDA as before.

                    What we are doing is updating the current EM and DE files from
                    the 1995 Employee History data.

                    Press RETURN


       Step 5.      Log Back on to TESTDATA - the 1996 live data.


       Step 6.      Run an Accrued Benefits Report to verify that the information is
                    OK.



        APPENDIX C
        __________

           Setting Up Table File for a Tax Deductible Deduction
                                                      _________

           M107B-.10,5.00,2.60,0,10



                               EARNINGS / DEDUCTIONS CODES TABLE
                               _________________________________

         Main Key:       Secondary Key: 401K        Description: 401K PENSION
         Affects Shifts (Y/N):   Hourly Rt/Amt:             FED FICA  ST  CITY DIS EIC
         Include:in Gross N FTE Work/paid       Deduct tax:  Y    N   Y    Y     Y (1)
        -----------------------------------------------------------------------------
                                      Additions/Deductions
                                      ____________________
          A-Addition, D-Deduction : D   Code: 4K      Based on tax frequency  :
          Combine all missed Deductions (Y/N):     Max # Periods to Carry Over:
          Limit Basis:Y-T-D or Total deducted: Y                Based on Hours:
         -----------------------------------------------------------------------------
          Percent of Gross or an Amount(P/A): A   Included in calculating (Y/N)
                                                  _____________________________
          % of Differential Rate (7-9):             (Vac/Sick/Hol/Other) :
          Type : W (E)arn(B)benefit(W)witholding    Differential           :
          G/L Account #:                          Union Hrs/Pay/Over Base:
          Natural No.  :                          Report(A/B/C) Hours/Pay:
          Wage Average  Hours/Pay :               Fringe Bnft/Deferred Comp:  (2)
          Pay at Overtime Rate    :               W2 code for box 17      :  (3)
           Enter (F) To File (I) To Ignore:  F    SUTA/FUTA : NN  Min. Net:  (4)
                                                    GROSS FED  FICA  ST  CITY DIS


       1M4H

          Above is an example of a Table File entry for a deduction that only deducts
                                                                         ____
       FICA.

          Note SUTA/FUTA should be set to NN.

                 If this is a qualified 401K pension plan enter the following:
                              ______________
                            (1) Enter tax status as shown above.
                            (2) Fringe bnft/Deferred Comp: NY.
                            (3) Enter 04 for W2 Code.
                            (4) Enter NN for SUTA/FUTA.


          Setting up Table File for Tax Deductible Earning (addition)
                                                   _______

                            (1) Enter N to all Taxes except FICA
                            (4) Enter YY for SUTA/FUTA


       ___________________________________________________________________________
       Note: the above examples define Tax Deductible as being exempt from
       Fed./State/ City Tax but not exempt from FICA.

                                ___

       Employees enrolled in the 401k should have the Master file field Pension
       checked.