Adjustable Benefits, Defined Benefit Plan with Low to No Volatility for the Plan Sponsor HR Specialty Products & Services Catalogue Executive Summary - A No Frills Distillation of Vendors Marketing Collateral - Thomas A Ference President & CEO Human Resources Mining & Distribution Co Locating, Validating and Accelerating HR Innovation Office: Cell: Fax: Website:

Adjustable Benefits, Defined Benefit Plan with Low to No Volatility for the Plan Sponsor DC plans saddle participants with investment, mortality and other risks and no longer provide plan sponsors with much competitive hiring advantage or longer term retention value. This creates a lose/lose proposition. This new type of adjustable defined benefit is specifically designed by the actuaries to have little to no contribution volatility nor any unfunded liabilities of significance for the employer. Participants in turn have no investment management risk nor can they outlive their retirement incomes. This creates a win / win proposition This works where participants annual benefit accruals are adjusted as needed per pension formula design and assets are managed to track liabilities so as to create financial stability for all. The plan is funded with employer contribution dollars: a) that get redirected from an existing DC plan so as to protect employees at retirement and create much needed glue to keep employees around or, b) coming from a modified / frozen DB plan where the new adjustable DB serves as a compromise for participants who would otherwise have no future pension accrual.

How this Plan Works – Typical Example An identified source of employer contribution is matched to a future-service-only, career pay formula expressed as a % of each years pay using an assumed low risk rate of investment return e.g. 5%. This formula produces a minimum / floor benefit Next, an adjustable benefit formula is designed that reflects the difference between the assumed rate of investment return and the actual investment return. If actual investment performance for the year is greater than the assumed rate, the adjustable benefit is increased and if lesser than assumed, it is decreased. The amount of actual investment return shared under this formula is capped with excess earnings above the the cap to be held in an experience stabilization reserve so as to smooth out contributions and liabilities for the employer The benefit earned each year under each formula is tracked and accumulated until retirement. At that time, the participant receives the greater of the two strings of accumulated benefits from one of the two formulas

Example Assumptions - Employee X AssumptionsYear OneYear Two Assumed Floor Benefit ROR 5% Actual ROR8%2% Annual Floor Benefit Accrual 1% of Current Years Pay Employee X Current Years Pay $60,000$61,000 Adjustable Benefit AccrualAccumulated Units X Current Year ROR Adjusted Unit Value Actuarially-Determined ROR Adjusted Unit Value Beginning of Year One $10

Example Calculations –Employee X ItemEnd of Year OneEnd of Year Two Annual Floor Benefit Accrual1% X $60,000 = $6001% X $61,000 = $610 End of Year ROR Adjustment8% - 5% = + 3%2% - 5% = (3%) Current Year ROR Adjusted Unit Value $10 X (100% + 3%) = $10.30$10.30 X (100% - 3%) = $9.99 Current Year Unit Accumulation = Annual Floor Benefit Accrual Divided by Previous Years ROR Adjusted Unit Value $600 / $10 = 60 Units (For the First Year Only, the Unit Value is Actuarially-Determined $610 / $10.30 = 59.2 Units Accumulated Floor Benefit Accrual $600$600 + $610 = $1210 Adjustable Benefit Accrual = Accumulated Units X Current Year ROR Adjusted Unit Value 60 X $10.30 = $618(60 Units Units) X $9.99 = $1,190.81

Accrued Benefit Example After 6 Years At the end of year 6, the Accumulated Adjustable Accrued Benefit is $3,183 vs. the Accumulated Floor Benefit of $3,100. The Participants Accrued Benefit then is the $3,183.

Funding Ratio Modeling An Investment Strategy that also considers the surplus asset buildup arising from the investment return sharing cap is developed and modeled to assess the underfunding risk

Another Strategy Using the same type of career pay benefit formula, the annual accrual rate (say 1% of each years pay) can be modified by formula. A pro-forma valuation is performed in the 4 th quarter of each year to determine how the funded status of the plan is and the accrual rate is adjusted up or down as necessary based on the funded status of the plan, the cost of benefit accruals and the level of contributions made by the employer. As the actuaries work with various firms, they consider the needs of the employer and help them with understanding new options and creative plan design strategies.

Next Steps 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 (Chicagoland area) or Thank you for your potential interest in this fresh thinking