Market Based Cash Balance Plan

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1 ENHANCED RETIREMENT PROGRAM Market Based Cash Balance Plan A fully integrated defined benefit plan solution Providing a robust retirement program for your partners or key employees can give you an edge when recruiting new talent and help ensure that your best people stay focused on adding value to the organization. Current IRS limits on defined contribution plans mean that your 401(k) savings plan may only replace a portion of pre-retirement income for this population. Many firms have researched traditional pension plans or non-qualified plans and concluded that these options may not be the right solution. While no single plan or combination of plans can provide full income replacement, a Market Based Cash Balance Plan (MBCB) through Fidelity may be one solution to help fill the gap. It offers your participants more tax-deferred saving through a qualified plan, and provides integrated servicing and planning support through familiar channels like Fidelity NetBenefits and the Fidelity Service Center. Fidelity is uniquely positioned to offer your organization a one-stop, fully integrated solution to enhance your retirement program. Fidelity can provide plan design guidance, recordkeeping services, actuarial support, investment management, and a robust participant experience. BUNDLED FIDELITY SERVICES TO SUPPORT YOUR PLAN Actuarial Investments Recordkeeping Take a closer look at how Fidelity can support your retirement program. To learn more about how a MBCB Plan fits into your strategy, speak with your Fidelity relationship manager or FidelityBenefitsConsulting@fmr.com. For Plan Sponsor use only. Not FDIC Insured May Lose Value No Bank Guarantee

2 How a Market Based Cash Balance (MBCB) Plan Works A MBCB Plan is often referred to as a hybrid defined benefit plan because it acts like both a defined benefit and a defined contribution plan. MBCB plans accrue benefits payable at a future date, typically in the form of a monthly pension, yet they are similar to a 401(k) plan in that the participant s benefit is based on the value of his/her individual account. Organizations with a significant percentage of employees earning beyond current IRS compensation limits are finding that this type of plan fills an important need in providing additional tax-deferred retirement income through a qualified plan. Here s how a MBCB plan works: The plan sponsor designs a plan that provides allocations to the MBCB for the participants in the plan (potentially up to $150,000 in additional tax-deferred savings beyond current IRS contribution limits). These designs will be subject to total lifetime qualified plan contribution limits and testing requirements Contributions usually are increased for older age groups, due to testing methodologies, potentially allowing older participants to accumulate more than younger participants Assets are invested through a single plan fund at the direction of the plan sponsor. Participant account values reflect their accumulated contributions plus the plan s actual ( market based ) rate of return. For the plan to comply with IRS non-discrimination rules and maintain its qualified status, additional benefits may be required for staff employees. The benefit to your participant To date, your participants have been faced with having to manage their share of the firm s annual profits on their own. This program opens up opportunities around managing tax liabilities and how best to segregate some or all of this money to provide income well into the future. Through the MBCB qualified vehicle, additional tax-deferred retirement savings can be funded. Here s a hypothetical example showing the benefit of participants contributing to a MBCB Plan versus managing the same amount outside of the plan. In this example, 100 participants in the plan each have $100,000 available from firm earnings. SAMPLE ORGANIZATION Start with $10,000,000 Initial Investment Traditional Investing Market-Based Cash Balance (MBCB) Plan $10M taken as taxable income Less taxes of $4,340,000 $5,660,000 $10M contributed into retirement trust Less cost for additional employee benefits and plan cost of $900,000 $9,100,000 Potential Net Spendable Income at Retirement 1,2 $15,179,000 Net investment (earnings less taxes) $20,429,000 Net investment in qualified plan (earnings less taxes) 1 Net particiapants income in traditional investing scenario assumes 39.6% Federal income tax, 2.9% Medicare tax, and additional Medicare tax of 0.9%. Net spendable income estimate assumes 20-years of investment return at 6%, $2,498,000 capital gains tax (calculated at highest bracket), and $475,000 additional Medicare/FICA tax. 2 Net participants benefit assumes $750,000 estimated cost of a additioanl employee benefits and $150,000 estimated cost of administering the plan. Net spendable income assumes 20-years of investment return at 6% and 30% income tax rate.

3 Fidelity s Integrated Solution Actuarial Services Fidelity Benefits Consulting retirement professionals will work with you to refine your total retirement strategy to include a MBCB Plan. This starts with a full understanding of your goals and priorities. Fidelity can provide plan design support, non-discrimination testing and sensitivity analysis, annual actuarial valuations, plan document support, and plan compliance services. Your actual MBCB Plan design will be based on a variety of factors, including who will participate in the plan, IRS retirement plan limits, meeting non-discrimination requirements, and your firm s investment strategy. Plan design example The example here looks at a simple, yet flexible Base plus Factor design. This design uses a baseline annual allocation amount then adjusted to different groups based on age (using non-discrimination testing limitation per age). The chart here shows a hypothetical example of how each group s allocation limit is established. For this example, and assuming a baseline annual allocation amount of $100,000, a 25-year old participant could be allocated up to $20,000 (Group A at 20% level) annually while a 60-year old participant could be allocated up to $125,000 (Group F at 125% level) annually. While this example limits allocations by age, a plan sponsor has substantial flexibility to determine the group for each eligible participant. IMPACT OF BASE PLUS FACTOR DESIGN 150% 100% Potential non-discrimination testing limitation per age ($100,000 Base allocation design) Allocation 50% 0% Group A Group B Group C Group D Group E Group F Age

4 Investments Fidelity s institutionally-focused asset manager, Fidelity Institutional Asset Management (FIAM), has created investment strategies specifically for MBCB plans. Together with our Fidelity Benefits Consulting team, these strategies have been designed exclusively to meet the investment objectives of defined benefit plans while leveraging the full depth and breadth of Fidelity s investment and benefits expertise. Fidelity s Global Institutional Solutions team brings a hands-on, consultative approach combined with an outcomeoriented investment management program all supported by extensive research and institutional expertise to help you achieve your business and investment goals. Solutions to manage market based cash balance plans Managing assets specifically designed for MBCB plans requires awareness of the potential impact of positive and negative market events. This team s unique blend of actuarial and investment expertise uses its capital markets expertise daily. INVESTMENT OPTIONS Lower Risk Range Higher Global Minimum Volatility U.S. Aggregate Bonds U.S. Short Duration Bonds Cash 40% 20/80 Pool 35% 35% 30/70 Pool 30% 30% 40/60 Pool 25% 5% For illustrative use only. For institutional use only. 20% 5% 30% 5% 40%

5 Recordkeeping Services Fidelity will bring its familiar recordkeeping services and plan administration experience to your MBCB Plan. From implementation to ongoing services, you will benefit from Fidelity s 25+ years of defined contribution and defined benefit plan experience. Implementing your new MBCB Plan will be handled by a dedicated project manager coordinated through your current client service team. This will help to ensure consistency and full integration with your other Fidelity recordkept plans and programs. In addition to regular team updates, service reviews, and annual business planning, you ll be able to access your plan information, run reports, monitor data, and initiate special requests online using Fidelity Plan Sponsor WebStation (PSW ). MBCB Plan participants will have easy access to their account from the NetBenefits home page. Participant information will automatically be available when using online planning tools and is available when talking to a Fidelity Retirement representative by phone or when working with a Guidance consultant at a local Fidelity Investor Center. If desired, Fidelity has a full suite of communication templates to support your MBCB Plan. From announcement to ongoing education, we ll help your participants understand the MBCB Plan, how it can enhance their future retirement income, and how to integrate MBCB Plan benefits into their overall retirement and financial planning. Participant support Your MBCB Plan participants will have access to the same online, by-phone, and in-person resources they are used to using today. Our goal is to ensure that your new MBCB Plan fits seamlessly into your retirement program and becomes just one part of your participant s retirement planning toolkit.

6 For Plan Sponsor use only. Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with any investment or transaction described herein. Fiduciaries are solely responsible for exercising independent judgment in evaluating any transaction(s) and are assumed to be capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies. Fidelity has a financial interest in any transaction(s) that fiduciaries, and if applicable, their clients, may enter into involving Fidelity s products or services. Information presented herein is for discussion and illustrative purposes only. Views expressed are as of the date indicated, based on the information available at that time, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the author and not necessarily those of FIAM. FIAM does not assume duty to update any of the information. Fidelity Institutional Asset Management (FIAM), formerly known as Pyramis Global Advisors, includes the following entities, or divisions of entities that provide investment services: Fidelity Institutional Asset Management Trust Company, a New Hampshire trust company (FIAM TC); FIAM LLC, a U.S. registered investment adviser; the Fidelity Institutional Asset Management division of FMR Investment Management (UK) Limited, a U.K. registered investment manager and U.S. registered investment adviser (FMRIM-UK); and the Fidelity Institutional Asset Management division of Fidelity Management & Research (Hong Kong) Limited, a Hong Kong and U.S. registered investment adviser (FMRHK). FIAM LLC may use the name Pyramis Global Advisors or Pyramis as an additional business name under which it conducts its advisory business. Fidelity Investments and/or Fidelity refers collectively to FMR LLC, a U.S. company, and its subsidiaries, including but not limited to Fidelity Management & Research Company (FMR Co.) and FIAM. Third-party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of FMR LLC or its affiliated companies. FIAM does not provide legal or tax advice and we encourage you to consult your own lawyer, accountant, or other advisor before making an investment. Fidelity Brokerage Services LLC, Member NYSE and SIPC, 500 Salem Street, Smithfield, RI FIDELITY INVESTMENTS INSTITUTIONAL SERVICES COMPANY, INC., 500 SALEM STREET, SMITHFIELD, RI