March 25, Dear Participant:

Transcription

1 March 25, 2016 Dear Participant: Recently, the Internal Revenue Service (IRS) changed the guidance for all cash account pension plans. Many companies, including Macy s, Inc., are required to adjust the interest rate applied to their pension plans. Effective Jan. 1, 2017, the Company will apply the greater of the current 30-year US Treasury securities rate or a 5 percent minimum interest rate to your Pension Plan ( Pension Plan ) account balance. This means that your Pension Plan account will earn a minimum of 5 percent interest on your Dec. 31, 2016 balance until you begin taking a distribution. Since the 30-year US Treasury securities rate is not fixed, the Pension Plan interest rate may increase in the future; however, the Pension Plan interest rate will not decrease below 5 percent. Additionally, the interest you accrue on your Pension Plan balance is compounding, which means that the longer you accrue interest, the larger your potential growth. A legally-required notice that explains this adjustment to Pension Plan is attached. The notice provides examples of how a Pension Plan benefit at the estimated retirement date at age 65 could be affected. This information is for your information only and no action is required. This change does not affect any benefits accrued in your protected benefit in a prior pension plan or your May Department Stores Company Retirement Plan benefits, if applicable. Any benefit accrued or earned in the Pension Plan will be preserved, including any interest applied to your Pension Plan account balance, until you begin distribution. You will retain all benefits you have earned and you will be paid in accordance with the rules of the Pension Plan during retirement. To review your Pension Plan account balance, please visit Benefits OnLine through My IN-SITE or at If you have any questions about this notice or your eligible service, call HR Services at MACY (6229) and select option 1 when prompted to speak to a Merrill Lynch representative. Sincerely, Bill Allen Chief Human Resources Officer Macy's, Inc. 204(h) Notice 03/2016 CAPP Act & Non-Neg. Union

2 ERISA Section 204(h) Notice for the Macy s, Inc. Pension Plan Purpose of This Notice You are receiving this notice because you are a Participant in the Macy s, Inc. Pension Plan ( Pension or Pension Plan ) 1 who accrued benefits under the Pension Plan s cash balance benefit formula and who currently has a. To comply with new federal regulations, a change will be made to the Pension Plan. This notice is merely informational. No action is needed on your part as a result of the change. s on your are developed based on a variable interest crediting rate designed to track 30-year U.S. Treasury securities subject to a minimum interest crediting rate of 5.25%. Effective January 1, 2017, and in response to regulatory guidance issued by the U.S. Treasury Department (Internal Revenue Service), this minimum interest crediting rate will be changed to an annual rate of 5.00% from the current annual rate of 5.25%. This notice provides more specific detail about how the change being made to the Pension Plan will affect your retirement benefits. This change only affects your benefit accrued under the Pension Plan s cash balance benefit formula and has no effect on any prior or grandfathered benefit formula under the Pension Plan. This notice is provided as required by Section 4980F of the Internal Revenue Code of 1986, as amended, and Section 204(h) of the Employee Retirement Income Security Act of 1974, as amended ( ERISA ) and is also intended to satisfy the ERISA requirements regarding a summary of material modifications for the Pension Plan. Capitalized terms that are not defined in this notice have the meaning provided to such terms by the Plan document. Background on Existing Pension Plan Benefits Formula You have a Pension Plan benefit based on a cash balance formula that provided Pay s, as described below, until the plan freeze (e.g., December 31, 2013), and s which are currently set at an annual interest crediting rate of 5.25% and applied to your. Pay s were based on your Vesting Service and Covered Compensation (referred to in this notice as Eligible Pay ) prior to the benefit being frozen: Applied Prior to Pay Freeze No Longer Applicable s of Service as of January 1 Less than 3 2.0% % % % % % % Annual Pay as a Percent of Eligible Pay The Pay for any calendar year was based on the s of Vesting Service that you earned as of January 1 of such year. The Pay described immediately above for a calendar year was then generally allocated to you as of 1 As defined in this notice, the Pension Plan refers to the Macy s, Inc. Pension Plan and each other Prior Plan, including, but not limited to the Federated Department Stores, Inc. Pension Plan (which was renamed the Macy s, Inc. Pension Plan as of June 1, 2007), each restated version of the Federated Department Stores, Inc. Pension Plan and each other Prior Plan which itself was previously merged into a separate Prior Plan.

3 December 31 of such year, provided you earned a year of Vesting Service for such year and otherwise continued to remain eligible to earn Pay s in the Pension Plan for such year. Formulas Other Than Formula Not Affected By Change If you were a Participant in one of the Prior Plan benefit formulas as of December 31, 1996, the change in the minimum interest crediting rate does not affect your benefit under the Prior Plan benefit formulas. If you previously earned benefits under the May Department Stores Company Retirement Plan that was merged into the Pension Plan, you will also receive that benefit when you begin receiving your pension payments. The change in the minimum interest crediting rate described above does not affect that benefit. Change in Benefits You will continue earning Vesting Service for purposes of vesting in your Pension Plan benefit (if you are not already fully vested) and you will continue earning quarterly s on your until you separate and begin receiving your pension payments. The quarterly interest rate is currently set to produce an annual return of 5.25% (or, if greater for any calendar year and as determined by the government, the annual interest rate on 30-year U.S. Treasury securities for the preceding November) and is reviewed and subject to change annually. Beginning January 1, 2017, the quarterly interest rate will be set to produce an annual return of 5.00% (or, if greater for any calendar year and as determined by the government, the annual interest rate on 30-year U.S. Treasury securities for the preceding November) and will be reviewed and subject to change annually. Impact of Change As a result of this change, your will increase after December 31, 2016 with quarterly s set to produce an annual return of 5.00% (or, if greater for any calendar year and as determined by the government, the annual interest rate on 30-year U.S. Treasury securities for the preceding November) that apply until the time following your separation from service when you request a distribution. Although the minimum rate is being changed, the Pension Plan is not at this time terminating, and thus you will still become vested (entitled to a benefit under the Pension Plan) only if you meet the current vesting rules that apply to your benefit under the Pension Plan (and that are described in your Summary Plan Description for the Pension Plan). Also, if you are vested in a Pension Plan benefit, your vested benefit under the Pension Plan will generally only be payable to you after your employment with Macy s, Inc. and its subsidiaries (collectively, Macy s ) terminates in accordance with the current provisions of the Pension Plan that concern distributions. In many situations, the provisions of the Pension Plan require or permit your vested Plan benefit to be paid in a form different than a single sum that commences at age 65 (or, if later, the date you cease to be an Employee of Macy s). Any such other form of benefit is generally determined in accordance with actuarial factors, set forth or referred to in the Pension Plan, that are applied to your vested under the Pension Plan. These types of provisions are not being amended at this time. Illustrations of Change on January 1, 2017 Macy s has developed a series of hypothetical illustrations for use in this notice. These illustrations are designed to allow you to more fully understand the impact of the change in s on your eventual pension benefit from the Pension Plan. The illustrations have been prepared so that you will be able to compare the of a hypothetical Participant (considering the impact of the change in the minimum rate change) to the that the same hypothetical Participant would have received had the s continued as in effect prior to January 1, 2017 on into the future. Please note that the illustrations assume continuous full-time employment with Macy s to age 65 and that the Plan s minimum interest crediting rate applies for all future periods. If the annual interest rate on 30-year U.S. Treasury securities increases to above the annual minimum interest crediting rate

4 of 5.00%, the difference between projected benefit amounts may be less than shown in these examples. Additional detailed illustrations are included in the section entitled Other Important Information beginning on page 4 of this notice. Example 1 Employee 22 with a of $500 as of December 31, 2015 For this Participant, the estimated at age 65 under the current formula, including future s, would be $4,528. Reflecting the change in the minimum interest crediting rate effective January 1, 2017, the at age 65 would be $4,081 (the will be higher than reflected here if the Example 2 Employee 45 with a of $10,000 as of December 31, 2015 For this Participant, the estimated at age 65 under the current formula, including future s, would be $27,828. Reflecting the change in the minimum interest crediting rate effective January 1, 2017, the at age 65 would be $26,597 (the will be higher than reflected here if the Example 3 Employee 55 with a of $30,000 as of December 31, 2015 For this Participant, the estimated at age 65 under the current formula, including future s, would be $50,043. Reflecting the change in the minimum interest crediting rate effective January 1, 2017, the at age 65 would be $48,986 (the will be higher than reflected here if the Example 4 Employee 62 with a of $70,000 as of December 31, 2015 For this Participant, the estimated at age 65 under the current formula, including future s, would be $81,614. Reflecting the change in the minimum interest crediting rate effective January 1, 2017, the at age 65 would be $81,227 (the will be higher than reflected here if the

5 Other Important Information The information below is intended to supplement the information provided earlier in this notice. Specifically, shown below are additional calculation details for the same four hypothetical Employee illustrations, and use the same assumptions, that were summarized earlier in this notice. Importantly, each detailed illustration below assumes that the Plan s minimum interest crediting rate applies for all future periods. If, however, the interest rate on 30-year U.S. Treasury securities exceeds the minimum interest crediting rate for one or more Plan s after 2016, the actual figures will be higher than reflected below. Example 1 Employee 22 with a of $500 as of December 31, 2015 As described above, the estimated at age 65 under the current formula, including future s, would be $4,528 compared to $4,081 reflecting the change in the minimum interest crediting rate. If this Participant terminates employment at age 30, the under the current formula would be $754 compared to $740 reflecting the change in the minimum interest crediting rate. 5.25% ing Rate 5.00% ing Rate $ $526 $ $ $ $554 $ $ $ $583 $ $ $ $614 $ $ $ $646 $ $ $ $680 $ $ $ $716 $ $ $ $754 $ $ $ $794 $ $ $ $836 $ $ $ $880 $ $ $ $926 $ $ $ $975 $ $ $ $1,026 $ $ $1, $1,080 $ $1, $1, $1,137 $1, $1, $1, $1,197 $1, $1, $1, $1,260 $1, $1, $1, $1,326 $1, $1, $1, $1,396 $1, $1, $1, $1,469 $1, $1, $1, $1,546 $1, $1, $1, $1,627 $1, $1, $1, $1,712 $1, $1, $1, $1,802 $1, $1, $1, $1,897 $1, $1, $1, $1,997 $1, $1, $1, $2,102 $1, $1, $2, $2,212 $1, $2, $2, $2,328 $2, $2, $2, $2,450 $2, $2, $2, $2,579 $2, $2, $2, $2,714 $2, $2, $2, $2,856 $2, $2, $2, $3,006 $2, $2, $3, $3,164 $2, $2, $3, $3,330 $2, $3, $3, $3,505 $3, $3, $3, $3,689 $3, $3, $3, $3,883 $3, $3, $3, $4,087 $3, $3, $4, $4,302 $3, $3, $4, $4,528 $3, $4,081

6 Example 2 Employee 45 with a of $10,000 as of December 31, 2015 As described above, the estimated at age 65 under the current formula, including future s, would be $27,828 compared to $26,597 reflecting the change in the minimum interest crediting rate. If this Participant terminates employment at age 55, the under the current formula would be $16,682 compared to $16,329 reflecting the change in the minimum interest crediting rate. 5.25% ing Rate 5.00% ing Rate $10, $10,525 $10, $10, $10, $11,078 $10, $11, $11, $11,660 $11, $11, $11, $12,272 $11, $12, $12, $12,916 $12, $12, $12, $13,594 $12, $13, $13, $14,308 $13, $14, $14, $15,059 $14, $14, $15, $15,850 $14, $15, $15, $16,682 $15, $16, $16, $17,558 $16, $17, $17, $18,480 $17, $18, $18, $19,450 $18, $18, $19,450 1,021 $20,471 $18, $19, $20,471 1,075 $21,546 $19, $20, $21,546 1,131 $22,677 $20,839 1,042 $21, $22,677 1,191 $23,868 $21,881 1,094 $22, $23,868 1,253 $25,121 $22,975 1,149 $24, $25,121 1,319 $26,440 $24,124 1,206 $25, $26,440 1,388 $27,828 $25,330 1,267 $26,597 Example 3 Employee 55 with a of $30,000 as of December 31, 2015 As described above, the estimated at age 65 under the current formula, including future s, would be $50,043 compared to $48,986 reflecting the change in the minimum interest crediting rate. If this Participant terminates employment at age 60, the under the current formula would be $38,747 compared to $38,381 reflecting the change in the minimum interest crediting rate. 5.25% ing Rate 5.00% ing Rate $30,000 1,575 $31,575 $30,000 1,575 $31, $31,575 1,658 $33,233 $31,575 1,579 $33, $33,233 1,745 $34,978 $33,154 1,658 $34, $34,978 1,836 $36,814 $34,812 1,741 $36, $36,814 1,933 $38,747 $36,553 1,828 $38, $38,747 2,034 $40,781 $38,381 1,919 $40, $40,781 2,141 $42,922 $40,300 2,015 $42, $42,922 2,253 $45,175 $42,315 2,116 $44, $45,175 2,372 $47,547 $44,431 2,222 $46, $47,547 2,496 $50,043 $46,653 2,333 $48,986

7 Example 4 Employee 62 with a of $70,000 as of December 31, 2015 As described above, the estimated at age 65 under the current formula, including future s, would be $81,614 compared to $81,227 reflecting the change in the minimum interest crediting rate. If this Participant terminates employment at age 64, the under the current formula would be $77,543 compared to $77,359 reflecting the change in the minimum interest crediting rate. 5.25% ing Rate 5.00% ing Rate $70,000 3,675 $73,675 $70,000 3,675 $73, $73,675 3,868 $77,543 $73,675 3,684 $77, $77,543 4,071 $81,614 $77,359 3,868 $81,227 Reservation of Rights Macy s reserves the right to amend, modify, or terminate the Pension Plan at any time in accordance with applicable law. Further, and consistent with the plan document rule, if any defined term or other description used in this notice differs from how that term is defined (or other description is used) in the Pension Plan document (or other applicable Prior Plan), the terms of the Pension Plan document (or other applicable Prior Plan) will control. Additional Information If you have any questions, please contact HR Services at MACY (6229). A representative will be available to assist you with any questions you may have regarding this notice. The legal name of the Pension Plan is the Macy s, Inc. Pension Plan. The plan sponsor is Macy s, Inc., whose principal place of business is 7 West 7 TH Street, Cincinnati, OH Date of Notice March 23, 2016