1. Issues on Plan Sponsors’ Minds How the Lockton Advantage Can Help

2. Lockton Retirement: Who We Are
Retirement Opportunity in the Northeast
11,075 DC plans in sweet spot with $611B in assets
2,777 DB plans in sweet spot with $142B in assets
Retirement Support in the Northeast
Deana Calvelli – Producer
KC Executive Benefits Team
Retirement National Team
Account Executive - TBH
$32.7M IN REVENUE BY SERIES
CLIENTS BY INDUSTRY
$37 BILLION
In Assets Under Advisement
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
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3. Lockton Retirement: What We Do
Retention/succession
Benefit completion
Cash flow optimization
Non-qualified deferred compensation plans
Executive Benefits
Fees
Fund line-up
Fiduciary process
Retirement outcomes
Defined Contribution
Investment  Plan Design  Administration  Communication 
Selection and Monitoring
Fiduciary Process
Portfolio management
LDI strategies
Pension risk transfer
Cost containment
Defined Benefit
CFO and/or VPHR buy protection for the business, security for the employee
Lockton value proposition is comprehensive advice, high service, outcome focus

4. Expanding the Conversation: Major Risks on Sponsors’ Minds

5. #1: Defined Benefit Plan Risks
Balance Sheet
Increased Expense and Volatility
Interest Rate
1Bureau of Labor Statistics, National Compensation Survey, 2014, private industry workers only
2Rates subject to indexing for inflation and could be higher
4Transamerica Retirement Solutions
3Lockton Retirement Plan Services

6. How Lockton Helps: Pension De-Risking
Lower
Effort
Cost to Implement
Risk Reduction
Higher
Effort
Cost to Implement
Risk Reduction
ASSET ALLOCATION
LIABILITY-DRIVEN INVESTING (LDI)
PLAN DESIGN
RISK TRANSFER
Glide-path approach
Objective monitoring
DB-centric investments
Assets and liabilities move in tandem
Trade higher returns for funded status certainty
Reduced benefit accruals
Soft or hard freeze
Cash-balance transition
Lump-sum window
Buy-in
Partial buyout
Plan termination
*Arranged from simplest to most complex implementation effort.
FOUR RISK TRANSFER STRATEGIES
SAMPLE PENSION DE-RISKING TIMELINE
1. LUMP-SUM WINDOW
One-time option for terminated employees to leave the plan.
Avoids requiring a lump sum as a plan feature.
Can save money if done before IRS mortality basis changes.
2. BUY-IN
Added annuity asset matches retiree liability.
Covered-population funding levels become relatively fixed.
3. PARTIAL BUYOUT
Shifts specific participant (usually retiree) liabilities to an insurance carrier.
Remaining plan’s funding levels change based on investment results.
4. PLAN TERMINATION
Ends the DB plan through the purchase of an annuity or payments of lump sum for all participants.
Data Gathering
Formulate Solution
Implement Solution
Plan Monitoring
0-60 Days
60-90 Days
Days
Ongoing
Approve solution and communicate to stakeholders/employees

7. Creating Client Value Through Pension De-Risking
A global supplier of manufacturing technology and services
LIABILITY-DRIVEN INVESTING
THE OBJECTIVE
Create predictability of funding to their defined benefit plan.
THE LOCKTON SOLUTION
An analysis and approach to fund the plan 100% within seven years and a glide‑path strategy to avoid locking in losses from the equity markets.
THE RESULT
Improved the likelihood that the plan’s investment returns would offset changes to liabilities.
Made future funding requirements significantly more predictable.
A publicly traded real estate company with a portfolio of income investments across the US
PLAN TERMINATION
THE OBJECTIVE
Manage rising Pension Benefit Guaranty Corporation and administrative costs and prepare for anticipated changes to mortality table rules.
THE LOCKTON SOLUTION
A plan to terminate the defined benefit (DB) plan, which included:
Project management, ERISA counsel, vendor management via reverse auction, transition management, and employee education.
THE RESULT
Eliminated liability associated with the DB plan.
Eliminated administrative expense of the DB plan.
Maintained employee engagement.
Negotiated 8% discount on vendor fees.

8. #2: Plan Sponsor Fiduciary Risk
Regulator Penalties & Litigation Settlements
RISKS
Penalties
Litigation
Reputation
Regulatory Action by the Numbers
Fee Settlements Are Especially Costly3
$823.2 million1
The amount reimbursed to benefit plans and participants based on DOL investigations in 2014
3,9281
The number of civil investigations the DOL closed in 2014
65%1
The percentage of those investigations resulting in monetary compensation or other corrective action
37%2
Of retirement committee members identify their roles as non-fiduciaries
$140
Median Settlement: $15M
Sources: 1www.plansponsor.com/dol-explains-drop-in-2014-collections-number/, Allicance Bernstein, Stuck in the Mud or Road to Success? DC Plans and Fee Lawsuits, Callan, 2015

9. Investment Outsourcing
How Lockton Helps: Benchmarking, Outsourced Fiduciary Support and Consulting Oversight
3(38)
3(21)
Investment Outsourcing
Compares plan design, fees and results with similarly-sized plans in the same industry
Proposes alternatives that may reduce cost and/or improve results
Establish an Investment Policy
Evaluates documents, oversight, and compliance
Highlights potential compliance risk and suggests mitigation options
Monitor Using Defined Institutional Processes
Analysis
Quality
Data
Document Committee Decisions

10. Creating Client Value: Through Outsourcing
Results:
Over a 5-year period,
of LockSMART recommendations remain above median (vs. industry average of 23%1)
70%
Lockton-advised plans were audited nearly
times per year over the last 5 years2 30
findings
1 ”Industry average” defined as above median managers in 2010 who remained so in 2015
2 Fiduciary Review process established in 2010

11. #3: Executive Benefits Risks: Retirement Income Shortfall
Limits prevent Social Security, qualified plans and personal savings from fully providing executive retirement income.
Attracting & Retaining Executive Talent
Succession Planning
Cash Flow Liquidity
RISKS

12. Executive Benefits Risks: Benefits Completion
Attracting & Retaining Executive Talent
Succession Planning
Benefit Completion
RISKS
Long-Term Disability
Life Insurance
Bonus
Standard Group Coverage: 60% of Salary ONLY1
Bonus
Standard Group Coverage: 2X Salary ONLY $500K)1
Gap
Gap
Covered
Covered
Salary
Salary
Covered
Covered
Salary
Salary
Most Employees
Executives
Most Employees
Executives

13. How Lockton Helps: Executive Benefits Strategy
NonQualified Retirement Plans
Supplemental Executive Benefit Programs
Funding
Corporate Owned Life Insurance (COLI)
Bank Owned Life Insurance (BOLI)
Mutual Fund Strategies
Coverage
Supplemental or Carve-Out Life and Disability Insurance
Keyman Policies
Individual Life Insurance
Individual Disability Insurance

14. Creating Client Value Through Executive Benefits Strategy
An international developer of fire prevention products
EXECUTIVE BENEFITS & KEY MAN COVERAGE
THE OBJECTIVE
Create C-Suite protection to provide competitive benefits package, create executive disability coverage and protection for the business against the loss of key executives.
THE LOCKTON SOLUTION
Re-bid existing insurance contracts and structured non-qualified and SERP plans along with Key Man life insurance coverage.
THE RESULT
Improved executive disability coverage from $6k / month to $21k / month without increasing cost.
Improved overall executive benefit replacement coverage to 60%-- equivalent to non-executive benefits– a difficult package for competitors to match.
Protected the company and families when the CEO and Chief Legal Counsel unexpectedly died, generating $2M in tax free death benefits.
A processor, packager and international distributor of poultry products
NON QUALIFIED PLAN RE-STRUCTURING
THE OBJECTIVE
Evaluate Union and Non-union qualified plan design as part of an acquisition, enhance plan to allow HCE participation and address a $5M deficit in the non-qualified plan.
THE LOCKTON SOLUTION
Consolidated qualified administration from three providers down to a single one. Changed qualified plan design. Mirrored non-qualified assets with liabilities and created endorsements between the life insurance provider and the participant plan document.
THE RESULT
$5M deficit resolved.
$200k in administrative fee savings.
Participant payment and taxation risks mitigated.

15. #4: Compensation Risks: Bidding Government Contracts
Attracting & Retaining Talent
Competitive Bidding
Regulatory Compliance
RISKS
Regulators stipulate minimum pay for contractors:
Base Wage & Cash Benefits subject to:
FICA
FUTA / SUTA
General Liability
Workers’ Comp
BASE WAGE +
FRINGE BENEFITS __________
TOTAL WAGE
Cash (easiest)
Can be
Vacation / Holidays $
“Bona Fide” plan
Increases payroll burden 11-60%
Drives labor cost

16. Creating Client Value Through Compensation Strategy
Pay Fringe in Paycheck
Base Wage $ Fringe $10.33
Total Wage $44.85
Payroll Burden $ (25%)
Bid Cost $56.06
Pay Fringe to “Bona Fide” Plan
Base Wage $34.52
Total Wage $34.52
Payroll Burden $ (25%)
“Bona Fide” Plan $10.33
Bid Cost $53.48
$2.58/hr savings per person

17. The Human Factor

18. #5: Aging Workforce Risk: What if Employees Can’t or Won’t Retire?
Trends in Workers’ Expected Retirement Age1
RISKS
Increased Employee Benefit Cost
Productivity Loss
Increased Workers’ Compensation Claims
Increased turnover expense as younger workers seek other opportunities
1Employee Benefit Research Institute and Greenwald & Associates, Inc, Retirement Confidence Surveys

19. Behavioral Finance: Choice Paralysis1
#6: Complexity Risk: HSAs, 401(k)s, Debt Employees Struggle with Options
RISKS
Inappropriate Employer Trade-off Between Health & Wealth
Inappropriate Employee Trade-off Between Health & Wealth
Behavioral Finance: Choice Paralysis1
More options (investments, plan types, savings options) increase interest, but reduce action.
6 Options
24 Options
Considered
40%
60%
Acted
30% 3%
1Iyengar and Lepper (2000)

20. Creating Client Value Through Employee Engagement
An international financial services advisory firm.
EMPLOYEE ENGAGEMENT
THE OBJECTIVE
Improve Retirement Readiness, particularly for pre-2014 hires who did not benefit from automatic enrollment.
THE LOCKTON SOLUTION
Positioned financially healthy behavior by partnering with a wellness service to provide 500 points against healthcare premiums for attending one-on-one meetings.
Launched associate twitter campaign on health and financial wellness topics
Re-structured the plan design to increase automatic enrollment defaults to 6% from 3% and added automatic savings escalation to 10%.
THE RESULT
40% of employees attended on-on-ones:
29% adopted voluntary automatic increase in 401(k).
50% increased deferrals.
87% elected beneficiaries.
All stated goals exceeded.
“We want to provide tools to empower our Associates. Wellness isn’t just about being physically healthy. It’s also about being financially secure and understanding how to achieve your goals in life.”
—Theresa Schnelle, Vice President,
Human Resources Operations Manager
Goals
Results
90% of meeting attendees act
90.22% took action
Increase salary deferrals to 7.02%
Increased to 7.66%
Increase participation to 92.99%
Increased to 94.21%
Increase beneficiary designations to 40%
Increased to 60.24%