1. The Reed Elsevier Pension Income Plan (PIP) and Salary Investment Plan (SIP)
Good morning and welcome. Thanks ofr coming to our meeting today which is on our pension and 401k plans. So why am I wearing this bakers cap and apron? Because Reed Elsevier helps you get the dough you need for retirement!
Pension and 401k, they go together like cookies and milk. How many of you feel you know a little about our 401k plan – we call it SIP? Right, you get your quarterly statements, you see your funds go up each quarter…Ok well, up and down.
How many feel you understand the Retirement Plan? Not so many of you. Well, we’re going to start out today talking about our Retirement Plan. We’ve given it a new nickname…We call it PIP! Why? it rhymes with SIP. And one nice thing I can tell you about PIP right away is that it never goes down! That why it’s the perfect complement to SIP.
As you will see, PIP and SIP are your Reed Elsevier Retirement Resources.

2. Today’s Purpose Discuss the changes for PIP for 2002
Explain how PIP works
Review when you can receive benefits
Tell you about other information resources to help you plan for your future
Today’s presentation will be spent making sure you understand how PIP works in general,
Well talk about the changes made to PIP as of January 1.
We’ll review briefly when and how you can receive benefits from the plan when you actually retire. In addition, I’ll review some of the other resources available to help address your questions.

3. Total Retirement Security
Building Your Future... + + +
Social Security
Other Sources
PIP
SIP
As we talk today, it’s important to remember that PIP is only part of the total retirement benefits provided by Reed Elsevier.
PIP: Company pays for it, there is no need to elect it, just show up for work and you’re accruing a benefit.
SIP: You must decide to participate. If you do, company matches your contribution.
Social Security: You and company pay.
Other sources – only you know. Bank account, former employer’s pension plan, rich Uncle Fred.
Once you understand how PIP works, you’ll be in a better position to begin thinking about other ways to build your total retirement income.
But first, I’d like to ask you a question about Social Security. =
Total Retirement Security

4. PIP QUIZ
In today’s dollars, about how much can a worker age 45 now making $50,000 per year expect to receive from Social Security at Social Security Retirement age?
A) $3,000
B) $2,500
C) $2,000
D) $1,500
(Read Slide question & the answers.)
“Does anyone have the correct answer?”
(Someone answers correctly)
“You’re one smart cookie” (hands out a cookie)
The answer is A: $1,500 a month.
Social Security is not going to provide that much – we can’t depend on Social Security for our retirement income.

5. PIP Highlights Your benefit grows as an account balance
Your account earns annual interest credits
The company adds pay credits each year based on your total pay each year
Your account balance can continue to grow with interest credits after you leave until you take your benefits
Benefits will become fully vested after 5 years
100% Company paid
Ok, now. Let’s begin with a basic overview of how PIP works. There’s nothing new here – some of you may know this already.
First of all, your benefit is displayed as an account balance, like 401k. PIP accumulates like a bank account so you can see your account grow each year.
Your account is credited with interest and pay credits each year.
It takes 5 years to vest in your benefit.
In addition, if you are vested and leave the company before retirement, your account will continue to grow with interest until you retire and begin receiving your benefit.
And, of course, it’s 100% company paid.

6. What’s New
Three months service for eligibility
Vested benefit is payable as an annuity in monthly installments at retirement or as a lump sum
SIP rollover accepted at retirement
2% automatic increase becoming an optional form
Here’s some features that are new for 2002!
Eligibility is now just 3 months of service. This applies to both full time and part time employees. [NOTE TO SPEAKER ONLY – PRIOR TO 1/1/02, PART TIME EMPLOYEES HAD TO WORK 1,000 HOURS IN A YEAR TO BE ELIGIBLE TO RECEIVE PENSION CREDITED SERVICE. NOW ALL PART-TIMERS, REGARDLESS OF HOURS WORKED, WILL BE ELIGIBLE AFTER 3 MONTHS OF SERVICE. PAST PART TIME SERVICE WILL COUNT FOR MEETING THE 3 MONTH RULE AND WILL BE COUNTED FOR VESTING SERVICE. PENSION CREDITED SERVICE WILL BEGIN AS OF THE LATER OF 1/1/02 OR DATE OF HIRE FOR PART-TIMERS WHO WORK LESS THAN 1,000 HOURS.]
As we mentioned earlier, your benefit under PIP will be displayed as an account balance. Now, for the first time, now when you retire you will have the choice of receiving a lump sum payment from the plan. Up till now, your only option was to take a form of monthly annuity.
Some of you will want to take the lump sum… you have ideas of how to invest it, you have plans for the money. Others may feel that they don’t want to receive your pension all at once. They prefer to know that they will receive a regular monthly check. If you’re of that second type, you’ll be interested to know about our next change.
Going forward when you retire, if you like, you can elect to have your SIP account balance rolled over into PIP and receive one combined monthly annuity.
Another change is that the 2% Cost of Living adjustment is no longer automatic…it will be available to you as an optional form of payment. Account balances will be adjusted upward as of January 1 by the value of the Cost of living feature, to make up for its going away.

7. + + PIP: How It Works Opening Account Balance Interest Credit Pay
Now let's look at how PIP works in general.
There are three important parts to understanding your benefit:
The opening account balance is the value of your PIP account at the beginning of the year.
The interest credit which is added to your account at the end of each year; and
The pay credit, which is the amount added to your account at the end of each year.
We will look at each of these factors in detail.

8. Opening Account Balance
Your opening account balance is simply the value of the account as of December 31st of the prior year.
When you are first hired, you have a zero account balance. But then you receive your first pay credit, and you’re off and running.
If you joined PIP when your prior employer’s plan merged with PIP, then you started off with an opening account balance, based on the value of your accrued benefit under your prior plan, and since then, your account balance has grown with interest and pay credits.
Opening
Account Balance
Interest
Credit
Pay
Credit + +

9. Interest Credit Added to your account at the end of each year
2001 rate is 6.23%; the rate for 2002 is 5.19%
Based on the average of 5-year and 10-year Treasury notes, but not less than 5%
Interest credits continue until you take your benefits
Let’s talk about how your benefit grows.
Your retirement account will earn interest each year. The interest rate is set for each year based on a blend of recent 5- and 10-year US Treasury note rates.
In 2001, the interest credit rate is 6.23%;, but what’s been happening to interest rates? [Right! They’re going down]. This is great news – if you’re refinancing your home, not great news for PIP.
Next year’s rate is 5.19%.
But don’t worry, The plan’s interest rate is guaranteed not to be less than 5%.
Opening
Account Balance
Interest
Credit
Pay
Credit + +

10. Interest Credit: Example
Opening Account Balance on January 1, 2002
Interest Credit Rate for 2002
Interest Credit on December 31, 2002
$10,000
x 5.19%
$519
Interest will be credited to your account each December 31st, based on your account balance at the beginning of the year.
For purposes of this example, let’s assume this employee has an opening account balance of $10,000 at the beginning of Here is how that account will grow with interest this year.
5.19% of $10,000 gives an interest credit of $519.
Opening
Account Balance
Interest
Credit
Pay
Credit + +
$519
$10,000

11. Pay Credit Opening Account Balance Interest Credit Pay Credit + +
Now, let's look at how your account grows through pay credits.
The pay credit is added to your retirement account each year and is equal to a certain percentage of pay, based on your age and service at the end of the prior year.
The pay credit is added to your account each December 31, based on your pensionable pay for that year.

12. Basic Pay Credit
Add age and service to get total number of “points”
Divide points by 10
Apply percentage to annual pay
Age +
Pay
Credit %
Service =
Points ÷ 10 =
Your pay credit percentage is based on your age and service each year.
To get your total points for a given year, your age and service are added together. Then the total is divided by 10 to get your pay credit percentage for that year.
Age you know. Service is the credited service you have under PIP. For most of you it will be your total service with the company. But if you were part of an acquisition, there are special rules for service with the prior company.
Your pay credit for the year is equal to your pay credit percentage times your pay for the year.
Pay credits made to your retirement account on December 31, 2002, will be based on your age and service as of December 31, 2001, and will take into account your pay during 2002.
Since your age and service go up each year, your pay credit percentage grows each year).
Your pay that is used to determine these pay credits includes salary, overtime and bonus. and commissions. [NOTE TO SPEAKERS: ONLY MENTION THE IRS LIMIT IF YOU ARE MEETING WITH EXECUTIVES: ‘ up to the IRS limit (which is $200,000 for 2002).’ ]
A more complete description of pensionable pay is included in the Summary Plan Description for PIP.
Opening
Account Balance
Interest
Credit
Pay
Credit + +

13. Pay Credit: Example + + Age Years of Cash Balance Service Total Points
Annual Pay
Annual Pay Credit
Added to your account on December 31 40
+ 10 50
÷10
5.0%
$50,000
x %
$2,500
Here is an example of how the pay credit works.
Let’s assume our employee is 40 years old and has 10 years of service on the prior December 31.
Her age and service add up to 50. We divide this by 10 to get a pay credit of 5.0%.
If her pay is $50,000 during the year, her retirement account is credited with 5.0% of this amount — or $2,500.
Opening
Account Balance
Interest
Credit
Pay
Credit + +
$2,500
$10,000
$519

14. Adding It Together: Example
Age: Service: 10 years
Salary: $50, Pay Credit: 5.0%
Account balance on January 1, 2002 $10,000
Interest credit (5.19%) on December $ 519
Pay credit on December $2,500
Account balance on December 31, $13,019
Now that we have reviewed how the pay credit is determined, let's look at an example of how your account can grow in a year.
Her opening account balance is $10,000 on January 1, 2002.
She receives the interest credit of $519.
She has a pay credit of $2,500.
As a result, this employee’s account balance would grow from $10,000 on January 1, 2002, to $13,019 on December 31, 2002.
Opening
Account Balance
Interest
Credit
Pay
Credit + +
$10,000
$519
$2,500

15. Watch How Your PIP Account Grows
Age: Service: 11 years
Salary: $52, Pay Credit: 5.2%
$16,399
Account balance on December 31, 2003
+ $2,704
Pay credit on December 31, 2003
+ $676
Interest credit (5.19%) on December 31
$13,019
Account balance on January 1, 2003
The following year, this employee is now age 41 with 11 years of cash balance service. Her points are 52 and so the pay credit would be 5.2% of pay.
Her age and service are higher, so her pay credit is higher.
The Interest credit is higher because there is a higher opening account balance.
So in just 2 years, the account balance grew from $10,000 as of January 1, 2002 to $16,399 on December 31, 2003.
Later I’ll show you a bar chart of how the account balance can really grow over a person’s career.
Opening
Account Balance
Interest
Credit
Pay
Credit + +
$13,019
$676
$2,704

16. Special Circumstances
Midcareer Adjustment
Additional Pay
Credit +
That’s a pretty simple formula, Here are two special features that complicate the plan just a little, but only to make it better.
There are some situations that can increase an employee’s pay credit each year.
The midcareer adjustment, and;
The additional pay credit
Let’s take a look at each one.

17. Special Circumstances: Mid-career Adjustment
Eligible if began accruing benefits after age 35
Treated as though hired at 35
Results in added points toward pay credit
Example:
Age joined Plan, 10 years ago
Mid-career Adjustment
Age Now
Service Now
Total Points
Divided by 10
Pay Credit
Midcareer
Adjustment 41
- 35 6
+ 51
+ 10 67
÷ 10
6.7%
The midcareer adjustment is designed to recognize that employees joining PIP later in their careers do not have as much time to earn a benefit under PIP.
For this reason, the plan gives extra points to anyone who joined the plan after age 35 as though they were earning service in PIP from age 35 on. As a result, points are added for service from age 35 on.
For example, assume you joined the Plan at age 41 and you’re now age 51. PIP goes back and recognizes the 6 years between ages 35 and 41, giving a point for each year in between. Add these 6 points to age 51 and your 10 years of service, and you would have 67 points, or a 6.7% pay credit, instead of a 6.1% pay credit.
This pay credit is calculated once but added to the calculation of your pay credit every year.

18. Special Circumstances: Additional Pay Credit
For Pay Over Social Security Wage Base
Additional Pay Credit (max: 6%)
Basic Pay Credit
Social Security Wage Base ($84,900 in 2002)
Remember how I said that Social Security is part of your total Retirement formula?
But Social Security doesn’t provide benefits for pay above the wage base which is $84,900 in So PIP provides an additional pay credit for earnings over the wage base.
It is determined in the same way as your basic pay credit — age plus service divided by 10 — but it is capped at 6%.
Your basic pay credit is on total pay. The additional pay credit is on pay over the wage base.
Your Pay
Midcareer
Adjustment
Additional
Pay
Credit +

19. When You Can Receive Benefits
Eligible to receive benefits:
Normal Retirement
At age 65 with 5 years of vesting service
Early Retirement
As early as age 55 with 10 years of vesting service, 5 years participation in PIP
Vested Benefit at age 55 with 5 years of service
Pension paid as a monthly annuity or a lump sum
Now that you know how much you can get, let’s talk about when you can begin receiving your benefit under PIP.
Once you have five years of service you can take your money at any time after age 55, no matter what your age is when you leave the company.
PIP’s normal retirement is at age 65 with 5 years of service.
Early retirement is as early as age 55 with 10 years of service, and you need to have 5 years of participation credit in PIP.
You can take your money as a lump sum or as an annuity. If you want a lump sum, fine, you’re done.
If you want an annuity, you are giving up your account balance and the Plan is taking on the responsibility of providing you with a monthly payment instead.
it is calculated using your account balance when you decide to take a distribution and a formula that takes into account your age and service. For example, if you retire at 65, your account balance would be divided by 10, and that would be the annual amount you would receive each year for as long as you live, whether it’s 8 years or 28 years.
You can choose from several payment options, which are discussed in the Summary Plan Description.

20. Benefit Example
Assume 40 year old employee with 10 years of service with an opening account balance of $10,000. She will work to age 65 and retire.
Total pay in 2002 is $50,000. She will receive 4% annual increases. Salary does not exceed social security wage base.
Assumed Interest Credit of 5% (PIP).
Annual benefit at age 65 under PIP is $28,000.
Let’s use our example of an employee who is currently age 40, has 10 years of service and earns $50,000. She will work until she is age 65 and retire at age 65.
She will receive annual salary increases of 4% per year and we’ll assume her salary will never exceed the social security wage base.
Assume a minimum of 5% interest is used under PIP (note that this is the plan minimum – the actual interest rate could be higher).
When she retires at age 65, she will receive an annual annuity of $28,000 per year if all her 25 future years of service is under PIP. Note, this benefit would be greater if actual interest credits exceed the minimum 5% that is assumed here.
$28,000 is a decent replacement ratio for someone earning $50,000, but realize that by retirement this person will be earning much more than $50,000 – with regular raises, it will be over $100,000. PIP’s pension will be an important part of her retirement income, but probably not enough by itself. That’s why we offer you SIP!! Together, PIP and SIP can give you a much better chance for a secure financial future.
Later I’ll show you a pie chart that puts these pieces together.

21. Account Balance Projections
Here’s that bar chart I promised you.
This chart shows how the account balance can grow over your career with Reed Elsevier.
This is our employee age 40 with 10 years of service, earning $50,000 this year. Her opening account balance is $10,000.
After 10 years, it’s over $50,000; at 15 years, it’s over $100,000, and it’s almost 300,000 in 25 years.
Look how powerful the pay credits and interest credits are – and this assumes just 5% interest!

22. PIP QUIZ What proportion of my income might I need in retirement?
B) 75%
C) 100%
D) Depends on the size of my boat!
The answer is D – it depends on the size of your boat.
It’s impossible to say exactly how much you’ll need when you retire, in part because the amount will be based on so many variables.
Someone who owns a home debt-free and is in good health for example, will have lower expenses than someone who is let’s say in a nursing home needing round-the-clock care.
As a general rule, some experts say you will need about 75% of your current gross month income to maintain a similar lifestyle after you quit working. Others say you need 100%, so if you are grossing before taxes $4,000 a month now, figure on needing perhaps $3,000 to $4,000 a month when you retire.

23. Planning for Retirement
Consider all of the ways you can plan to build
your future
PIP
SIP
Social Security
Other sources of income
So you’re never too young or too old to be thinking about saving for the day you decide to live without a paycheck.
PIP will not — nor is it intended to — provide all of what you will need to live on in retirement.
For this reason, it is important to consider what other sources of retirement income you can begin building.
This should include our 401(k) plan — SIP — the Reed Elsevier US Salary Investment Plan.
In addition, Social Security may be available to you and you can call the Social Security administration to receive an estimate.
You should also consider your other investments such as personal savings, investments and other assets.
Social Security
Total
Retirement
Income
Other
Sources
PIP +
SIP + + =

24. Additional Resources for Information
Call the Reed Elsevier Retirement Center at between 8am and 6pm (ET), Monday through Friday
PIP highlights brochure
Retirement Plan Website
Annual pension statement
Summary Plan Description
Reed Elsevier also provides resources that can help.
You can call the Reed Elsevier Retirement Center. When you call, you’ll be connected with a trained Retirement Benefit Specialist who can help answer any questions you may have about PIP.
In addition, you will receive a copy of the PIP highlights brochure today, and this portfolio where you can keep all your Reed Elsevier benefits information.
Most of you should have already received a letter with your PIN so you can access the Retirement Plan Website. You can use this tool to do benefit projections! You decide how many more years you’ll work, what your raises will be, what the interest rate will be going forward. The web will show you what your account balance will look like when you retire. And not only your account balance, but how much of an annuity you can receive…if you take a life annuity payable for your lifetime, or one where it continues to your spouse after your death, or one that guarantees at least 5 years of payments are made to someone. There’s lots of possible ways to take your annuity, and you can model them all on the website.
And if that’s not enough, each year, you are sent an annual benefit statement.
So when I stop you in the hall in six months and ask you about the RE Retirement Plan, I expect to see nods of recognition, not the blank looks I got at the beginning of the meeting.

25. PIP Website https://dbconnect.towers.com/reed
Here is a screen shot of the PIP website log in page. This website can be used to get information about the plan and well as perform benefit estimates. You need a PIN to access the site. If you do not have a PIN, you can contact the PIP Retirement Center.

26. This program provides some of the features of the Reed Elsevier US Retirement Plan (PIP). For more detailed information about the plan, you should read the Summary Plan Description of the PIP, which is available by calling Neither this presentation about PIP nor the Summary Plan Description, however, takes the place of the applicable plan documents. Should any questions ever arise about eligibility or the nature and extent of your benefits from the PIP, the formal language of the plan documents as construed and interpreted by Reed Elsevier Inc. will govern. Reed Elsevier Inc. reserves the right to modify or terminate this plan at any time.

27. Questions, Anyone? Thank you for your time and attention.
Are there any additional questions I can answer?