The archive of Ameritas Product & Service Notices can be found on Producer Workbench > Product Portfolio.

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1 Date: September 1, 2016 Form Number: PS 4030 To: Field Associates Discard After: Keep Indefinitely RE: Ameritas Update #5: Recent Business Decisions and Other Developments Summary: Since our last update, Ameritas leaders and specialists from across our organization have been very actively engaged in careful review of the Department of Labor s Fiduciary Rule. Significant resources and talent have been and will continue to be focused on our collective response to these regulations. You, our valued field partners, can be sure we re doing all we can to help you and your colleagues prepare to thrive in this new environment. Great strides are being made, with strong support from our Field Advisory Cabinet (FAC). Additional Information: Please read the attachment to learn more about the recent business decisions and other developments from Ameritas. Have questions? You can submit questions to the new Ameritas Fiduciary Information Center by ing FiduciaryFocus@ameritas.com or calling You can also contact your relationship manager at Ameritas or any FAC Fiduciary Rule Subcommittee Member. The archive of Ameritas Product & Service Notices can be found on Producer Workbench > Product Portfolio. Unless otherwise specified, any entity referenced in any notice is not an affiliate of Ameritas or any of its affiliates. This information is provided by Ameritas, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to: Ameritas Life Insurance Corp., 5900 O Street, Lincoln, Nebraska 68510; Ameritas Life Insurance Corp. of New York, (licensed in New York) 1350 Broadway, Suite 2201, New York, New York 10018; and Ameritas Investment Corp., member FINRA/SIPC. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas, visit ameritas.com. Ameritas and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life is a registered service mark of affiliate Ameritas Holding Company Ameritas Mutual Holding Company For producer or registered representative use only.

2 The Department of Labor Fiduciary Rule Recent Business Decisions and Other Developments An Ameritas Update: September 1, 2016 Since our last update, Ameritas leaders and specialists from across our organization have been very actively engaged in careful review of the Department of Labor s Fiduciary Rule. Significant resources and talent have been and will continue to be focused on our collective response to these regulations. You, our valued field partners, can be sure we re doing all we can to help you and your colleagues prepare to thrive in this new environment. Great strides are being made, with strong support from our Field Advisory Cabinet (FAC). A high-level marketplace assessment indicates that Ameritas continues to track with the industry in preparing for implementation of the rule. Few have announced significant changes yet, but most of the industry is now moving forward with planning and preparation, tackling new challenges as they arise and as the ramifications of the rule continue to be revealed. For our part, we don t have all the answers yet, but we ve made excellent progress over the summer and are discovering that there s good news to be shared. And that may be the single most important takeaway from this update a reminder that the changes to our business model driven by the Fiduciary Rule offer great opportunity to those with the vision and energy to see and grasp an advantage. The rule s most worthy intentions align with what Ameritas is in business to do: We all fulfill life by protecting the best interests of our customers and helping them secure their financial future. Yes, some of our processes are going to change, as will some of the solutions we offer, but that s what strong, successful organizations do. They adapt, they retool, and they move forward. The remainder of this Ameritas update shares key conclusions and business decisions reached, assesses the decisions and issues we continue to study, shares further details of our accelerating activities, and announces additional resources now available to support you. The Top Five Things to Know About the Fiduciary Rule 1. If you are recommending and selling products in the qualified space, whether for IRAs or 401(k)s, you are a fiduciary and your activities will fall under the requirements of the DOL Fiduciary Rule. Virtually everything we currently do fits into the rule s prohibited transactions category. There are really no exceptions for IRAs, only regulatory exemptions, so to continue providing individualized retirement investment advice, you ll need to work within the available exemptions and avoid conflicts of interest related to compensation. The other option is to avoid fiduciary duty by providing no specific investment recommendations, or by providing only education, for 401(k)s. 2. The Fiduciary Rule requires reasonable fees and compensation, but reasonable hasn t been defined. This will be clarified over time, but the net result will no doubt bring downward pressure on compensation. Although level fee structures (specific dollar amounts or percentages) for proprietary and non-proprietary products will reduce conflict of interest, reasonable compensation and levelized compensation are not the same thing. Moreover, although fee-based business is likely to replace some commission-based business, this may not be the best solution in many situations. 3. The dynamics of the current business model will change. A contract (the Best Interest Contract or BIC ) will be required for virtually all rollovers and all activity in the qualified market. To use the contract, one Financial Institution must raise its hand and take full fiduciary responsibility for all activity with that client. The contract is between the Financial Institution and the client, and the GA/agent are not direct parties to that contract.

3 4. Existing business can also become subject to the DOL rules. The grandfathering exception is very narrow basically denying any interaction with the client. If you give advice or take new premiums/contributions into existing products and receive compensation for those premiums/contributions, the Fiduciary Rule will apply. 5. The Fiduciary Rule requirements take effect as of April 10, 2017, but actual use of the BIC will not be required until January 1, All other aspects, especially the Impartial Conduct Standard requiring advice in the Best Interest of the client, must be adhered to by the April date, and many in the industry are working towards a January 1, 2017 launch date for new compensation, rewards, policies and procedures. Preparation and Implementation: A DOL Fiduciary Rule Timeline Business Decisions Made As might be imagined, regulations as sweeping as the Fiduciary Rule have significant implications for our corporate business model, as well as your own. Hundreds of scenarios and processes must be considered, created or modified before we are fully ready to serve our clients, support our field partner network, and successfully market both proprietary and non-proprietary solutions in the post-implementation world. Many issues are still being studied and options weighed, but the Ameritas leadership team has already made a number of business decisions that will in turn guide next steps: A continued commitment. Ameritas is in the qualified retirement market for the long term and will continue to offer proprietary products. We will continue to market both proprietary and non-proprietary annuities and securities through Ameritas Investment Corp. (AIC) We remain fully committed to our shared distribution model and the network of professionals who partner with Ameritas to serve consumers in the retirement investment market We plan to use the BIC and ERISA Prohibited Transaction Exemption (PTE) exemptions wherever available

4 A dedicated financial institution. AIC will become the Fiduciary Rule Financial Institution for all Ameritas Life Insurance Corp. (ALIC) products sold in the qualified market. All ALIC annuity products (variable, indexed and fixed) for qualified money will go through AIC All ALIC retirement plan sales (group variable annuities) will go through AIC All compensation for ALIC-qualified products, including overrides, will be paid through AIC All non-proprietary indexed, fixed and group variable annuity sales by AIC agents and registered representatives will go through AIC All compensation will be levelized between proprietary and non-proprietary products for all lines Eligibility and training. To sell Ameritas annuity products (fixed, indexed, variable or group variable) in the qualified market, an agent will need to be registered with a Series 6 and 63, and to complete all related training. The General Agent will also need to be affiliated with AIC to receive compensation. Training will be required for all representatives (more information to follow) Training courses to be considered are currently offered by the American College, NAIFA, and RegEd Pending legal challenges. While a number of legal challenges to the DOL s Fiduciary Rule are pending, no one can predict how the courts will decide those cases, or whether other events will intervene to modify these regulations. Like much of the industry, Ameritas has decided that the only prudent course is to continue preparing for implementation in April Work in Progress and Working Assumptions Incentives and benefits. Finding solutions in this area has been a key message from our FAC subcommittee and remains one of our top priorities. We are now finalizing a new benefits, trips, incentives and rewards structure that will meet the demands of the Fiduciary Rule while creating maximum value for our field partners. While not directly prohibited by the DOL, regulatory challenges remain, but our plan would include retention of benefits (health insurance) through and beyond 2017, and allow us to provide credit for non-qualified Gross Dealer Concession (GDC). By year-end we should have an inclusive solution in place, providing attractive qualification opportunities for as many of our field partners as possible. Approved annuities. To meet the "reasonable" definition for qualified sales, AIC will likely require selection from a limited group of variable, indexed, fixed and group variable annuities. To be included on the AIC list, Ameritas products will be competitive and held to the same standard as non-proprietary products. Understanding process changes. Ameritas product suite change maps for both IRA and ERISA/retirement plan solutions have been prepared, showing exemption categories, requirements and other considerations for various products and platforms recommended and sold under brokerage and advisory models. The latest versions of those documents accompany this update, but this information will be subject to change as the industry continues to analyze and understand these regulations. Retirement plans. For retirement plans, current working assumptions anticipate that activities will fall into two main categories: Education/Commissions and Investment Advice/Fees. AIC RRs will only be able to provide education no investment advice. A third party 3(38) fiduciary may be required for NAV platforms and a third party 3(21) fiduciary for GVAs AIC IARs will need to meet qualification requirements and be approved by AIC in order to provide plan-level investment advice

5 Non-qualified business. As it relates to the DOL Fiduciary Rule, it s our intention that non-qualified sales of both fixed and indexed annuities will likely remain outside the broker-dealer structure at this time, but this arrangement could become subject to change as the industry evolves. Pending Decisions and Unanswered Questions There are some important issues that have not yet been resolved, but are being carefully researched, as Ameritas and the FAC consider what s best for the long-term mutual success of the company and our field partners. We want to provide maximum visibility, and provide a list of unresolved issues here: Products and Processes How will new business (direct and platform) be processed through AIC? How will existing direct business, such as American Funds, be processed through AIC? Will there be a customer account minimum? For grandfathered business, how will negative consent be leveraged? Will we be able to include life insurance in qualified plans? Compensation and Recognition How will we ensure that our field partners continue to be compensated for services, including renewals and trails? Training What will be the best way to design and offer effective training processes? When will training be available, and what frequency will best protect our field partners? Compliance Will qualified life insurance sales use PTE (which requires reasonable and disclosed compensation)? Will it be possible to make recommendations to purchase life insurance with qualified distributions and/or changed deferrals? Can this source of funds be tied to life contracts? Will that scenario use PTE 84-24? When does the BIC need to be signed by AIC? What needs to be documented in the file? How will we best protect our field partners by ensuring that their investment recommendations have clearly been made in the customer s best interest? Who will define reasonableness and manage benchmarking? Recent Developments and New Resources On July 13, company representatives held a planning session with members of the FAC Fiduciary Rule Subcommittee in Kansas City. The agenda included discussion of the role of the fiduciary, many of our working assumptions, analysis of the retirement product platform, the role of the BIC, compensation and recognition, grandfathering, existing business strategies, communication and training plans. The session generated valuable feedback that continues to inform our assumptions and decisions.

6 Ameritas is providing our field partner community with a growing body of news, commentary, planning tools and more, all focused on the DOL rule, and all found on our new Fiduciary Rule microsite. You can access it from Producer Workbench or our Fiduciary Rule communications. Ameritas Updates and other guidance, important industry articles and government publications, timely commentary, a calendar of events and compliance dates, links to videos, and more can be found there. In early July we launched the Fiduciary Rule Journal, featuring commentary from Ameritas leaders that spotlights new developments and recommends third-party articles providing additional detail and perspective. In early August we created the Ameritas Fiduciary Information Center to help our partners prepare for implementation of the rule and understand the implications of fiduciary duty when protecting the customer s best interests. A special address and a dedicated voic box (see the For More Information section below) are now monitored by a team of Ameritas experts who will review and respond to your questions and comments in a timely manner. Work is underway to use that dialogue as one source for a new frequently asked questions support feature on the Fiduciary Rule page. The Fiduciary Rule is of course a major focus at the company s premier field partner event, Ameritas Connection, held in Omaha, NE from August 30 to September 1, Attendees hear speeches, platform presentations and panel discussions featuring company and industry leaders, and supporting materials are made available after the event for those unable to attend. We also continue to work with and gather information from various associations representing our industry, including the National Association of Insurance and Financial Advisors (NAIFA), the Association for Advanced Life Underwriting (AALU), American College and the Financial Services Institute (FSI), the American Council of Life Insurers (ACLI), LIMRA/LOMA, and other organizations providing guidance and representation. For More Information Feel free to submit your questions to the new Ameritas Fiduciary Information Center by ing FiduciaryFocus@Ameritas.com or calling As always, you can also contact your relationship manager at Ameritas, or any FAC Fiduciary Rule Subcommittee member. Please note that the subject matter in this communication is intended as general education and presented here with the understanding that Ameritas is not providing legal or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal or tax advice.