Human Resources Policy Manual 06/01/2011 (rev. date) Replaces 12/15/2009 (rev. date) State Farm 401(k) Savings Plan Purpose Participation Enrollment

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1 Human Resources Policy Manual 06/01/2011 (rev. date) Replaces 12/15/2009 (rev. date) State Farm 401(k) Savings Plan Purpose Participation Enrollment New Hires - Automatic Enrollment All Employees Quick Enrollment All Employees - Enroll on Your Own My State Farm 401(k) Savings Plan Resource Web site Contributions Vesting Salary Deferral Contributions Before-Tax Contributions Roth 401(k) Contributions When You Leave the Company Example Qualifying Salary Deferral Contributions Company Matching Contributions Non-Elective Contributions (NEC) Rollover Contributions Maximum Annual Addition Investment of Contributions Target Date Investment Options Equities, Balanced, and Fixed Income Accounts Portfolio Strategies and Asset Allocation Income Portfolio 2005 Portfolio 2010 Portfolio 2015 Portfolio 2020 Portfolio 2025 Portfolio 2030 Portfolio 2035 Portfolio 2040 Portfolio 2045 Portfolio 2050 Portfolio Equities Account Balanced Account Fixed Income Account Valuation Day

2 Earnings Change Future Investments Transfer Money Between Investment Options Salary Deferral Contributions Change Example Automatic Contribution Increase Loans How to Apply If You Do Not Repay Your Loan If You Leave the Company If You Transfer to an ESP or SAA Employee, or to Canada Withdrawal of Contributions Non-Hardship Withdrawal Withdrawal of Roth 401(k) Rollover Contributions Withdrawal of Rollover Contributions Hardship Withdrawal Age 59 ½ Withdrawal Age 59 ½ Roth 401(k) Withdrawal Qualified Military Reservist Distribution Active Military Withdrawal Settlement Options Small Distribution Settlement Example Special Notice Regarding the Sharing of Information with State Farm Bank Settlement at Termination Settlement at Retirement Settlement Upon Disability Settlement at Death Beneficiary Designation Assignments Not Permitted Qualified Domestic Relations Orders Rollover Options Roth 401(k) Rollovers Out of the Plan Statements Taxation Top Heavy Provisions Claims For Benefits Processing Claims Denial of Claim Review Procedure

3 Rules and Regulations Right to Amend Right to Discontinue Plan Blackout Periods Plan Sponsor Employer Identification Number Plan Number Participating Companies Plan Administrator and Fiduciary Type of Plan Type of Administration Record Keeper Pension Benefit Guaranty Corporation Additional Information End of Plan Year Agent for Service of Legal Process Funding Medium Trustees Scope of This Description Member Rights and Protections Under ERISA Special Tax Notice Regarding Plan Payments Not From a Designated Roth Account Your Rollover Options General Information About Rollovers How can a rollover affect my taxes? Where may I roll over the payment? How do I do a rollover? If you do a direct rollover If you do not do a direct rollover How much may I roll over? If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions? If I do a rollover to an IRA, will the 10% additional income tax apply to early distributions from the IRA? Will I owe State income taxes? Special Rules And Options If your payment includes after-tax contributions If you miss the 60-day rollover deadline If you have an outstanding loan that is being offset If you were born on or before January 1, 1936 If you roll over your payment to a Roth IRA If you are not a plan participant

4 Payments after death of the participant If you are a surviving spouse If you are a surviving beneficiary other than a spouse Payments under a qualified domestic relations order If you are a nonresident alien Other special rules Special Tax Notice Regarding Plan Payments From a Designated Roth Account Your Rollover Options General Information About Rollovers How can a rollover affect my taxes? Where may I roll over the payment? How do I do a rollover? If you do a direct rollover If you do not do a direct rollover How much may I roll over? If I don't do a rollover, will I have to pay the 10% additional income tax on early distributions? If I do a rollover to a Roth IRA, will the 10% additional income tax apply to early distributions from the IRA? Will I owe State income taxes? Special Rules and Options If you miss the 60-day rollover deadline If you have an outstanding loan that is being offset If you receive a nonqualified distribution and you were born on or before January 1, 1936 If you are not a plan participant Payments after death of the participant If you are a surviving spouse If you are a surviving beneficiary other than a spouse Payments under a qualified domestic relations order If you are a nonresident alien Other special rules For More Information

5 State Farm 401(k) Savings Plan SUMMARY PLAN DESCRIPTION STATE FARM 401(k) SAVINGS PLAN PURPOSE: The primary purposes of the Plan are to provide participants the opportunity to accumulate retirement assets in a tax-favored program through the systematic investment of funds contributed by Participants and the Companies, and to provide a source of retirement income for retired Participants. It is the intent of this Plan to constitute a plan described in section 404(c) of ERISA and Title 29 of the Code of Federal Regulations section (c)-1, and that the fiduciaries of the plan may be relieved of liability for any losses which are the direct and necessary result of investment instruction given by a participant or beneficiary. PARTICIPATION: If you are an Employee (as defined below) and are 18 years old, you are a participant in the Plan. You are an Employee if, based on the payroll records of the Companies, you are employed in the United States by one of the Participating Companies. Employees include trainee agents, Employee-agents, special sales representatives, and officers of the Companies. Not included as Employees are: 1. Any directors (unless otherwise employed by the Companies); 2. Any person whose terms and conditions of employment are determined by a collective bargaining agreement between the Companies and a labor union which does not make the Plan applicable to them; 3. Any person or Agent, other than an Employee-agent whose remuneration from the Companies is paid primarily by means of commissions, retainers, fees, severance pay, retirement allowance, or any other form of compensation other than salary and bonuses; 4. Any employee of a trainee agent or field representative; 5. Any leased employee performing services for the Companies. The term leased employee means any person who is not an employee of the Companies but who provides services to the Companies pursuant to an agreement between the Companies and a leasing organization. 6. Any Employee operating under a Staff Assistance Agreement entered into on or after January 1, 2005.

6 ENROLLMENT: As explained below, newly eligible employees will be automatically enrolled in the Plan. Other employees may enroll at any time. To opt out of the automatic enrollment feature, to make your own contribution elections, or to change contribution levels and/or investment options, you may log on to My State Farm 401(k) Savings Plan Resource Web site or contact the State Farm 401(k) Savings Plan Service Center at Customer Service Representatives are available between 8 a.m. and 4 p.m. Central Time, Monday through Friday. New Hires - Automatic Enrollment Newly eligible Employees will automatically be enrolled in the 401(k) plan. The default is a before-tax contribution rate of 3% of your gross bi-weekly income amount and includes an automatic increase of 1% each year (up to a maximum limit of 10%) generally corresponding with your annual merit increase timing. The default investment fund is the Target Date investment option based on the year you will attain age 65. Shortly after your hire date, you will receive a letter and a kit mailed to your home address explaining the Automatic Enrollment features. New Hires can opt out of this automatic enrollment within 30 days of their hire date, or can change their contribution levels and/or investment options at any time. All Employees - Quick Enrollment Employees who have never enrolled in the Plan or opted out of the automatic enrollment feature are eligible for quick enrollment. Quick enrollment is a streamlined approach to enroll in the plan right away without having to take the time to make many decisions. The default contribution rate is 3% of your gross bi-weekly income amount and includes an automatic increase of 1% each year (up to a maximum limit of 10%) generally corresponding with your annual merit increase timing. The default investment fund is the Target Date investment option based on the year you will attain age 65. You can change the default contribution rate and/or investment option at any time to meet your needs. All Employees - Enroll on Your Own Employees who have never enrolled in the plan or opted out of the automatic enrollment feature are eligible to enroll in the Plan on their own. The employee must elect a contribution type (before-tax, Roth 401(k), or a combination of both), a contribution amount or rate (percentage), and the investment option(s) for your future contributions. The contribution amount must be a minimum of $5 per pay period. The contribution rate must be a whole percentage with a minimum of 1% and a maximum of 100%. The contribution rate is calculated on your available biweekly income amount. For more information about the income amount that is used for this calculation, see Before-Tax Contributions and Roth 401(k)

7 Contributions below. Contributions are taken from all paychecks (26 except for years where 27 apply). Investment Option elections must be made for your future contributions and may be allocated among the 14 funds available. Elections are indicated as a % and the total of all percentages must equal 100%. My State Farm 401(k) Savings Plan Resource Web site: You can access the My State Farm 401(k) Savings Plan Resource Web site from any computer with internet access. You can access your account by logging on at This site is available 24 hours a day, seven days a week. You also have access to an automated telephone system that is available 24 hours a day, seven days a week at Customer Service Representatives are available between 8 a.m. and 4 p.m. Central Time, Monday through Friday. You are required to establish a User ID and Password to access your account. The system can be used to: Begin making Salary Deferral Contributions Change contribution amount or rate (percentage) Change allocation percentage for future investments Obtain current account information View a statement of account Request forms Transfer Money to another Investment Option Request a loan Request a withdrawal or distribution Request Rollover forms and information View Fact Sheets for Investment Options Designate a beneficiary CONTRIBUTIONS: Contributions consist of: Your Salary Deferral Contributions in the form of: o Before-Tax Contributions, or o Roth 401(k) Contributions Company Matching Contributions Company Non-Elective Contributions (NEC) An account will be established in your name to hold all of the contributions and any associated earnings allocated to you. VESTING: You are 100% vested in your account. This means your account cannot be forfeited or reduced (other than with respect to market fluctuations).

8 SALARY DEFERRAL CONTRIBUTIONS: There are two types of Salary Deferral Contributions that you can make to the Plan: Before-Tax Contributions and Roth 401(k) Contributions. You may contribute on either basis but the combined amounts may not exceed the Internal Revenue Service (IRS) limits that are set forth each year. Participants who are (or will be) age 50 or older during the year may make an extra catch-up contribution. The IRS reviews the limits each year in the Fall to determine whether the limits need to be adjusted for the following year. The limits may be obtained by calling the State Farm 401(k) Plan Service Center at or by accessing the My State Farm 401(k) Savings Plan Resource Web site at Contribution Limit Catch-Up Provision (Age 50+) 2011 $16,500 $5,500. An employee cannot contribute in excess of the IRS limits. Any contributions made to a different employer plan during the year must be deducted from the maximum eligible limits for that plan year. If you contributed more than your contribution limit to this Plan or to this Plan and another plan, you must contact the Record Keeper no later than April 1 following the close of the Plan year in order to have the excess amount distributed to you. When you are deciding on the amount to contribute to the Plan or want to change the amount you are now contributing, remember the 401(k) Savings Plan is designed as a long-term savings plan. You should only put in the Plan an amount you can afford to leave in over a long period of time. While you may withdraw your money under certain circumstances, (see Loans, Withdrawal of Contributions, Rollovers) to gain the most benefit from the Plan, you should leave your money in the Plan for as long as possible. Certain low income individuals who make Salary Deferral Contributions to a 401(k) Plan may be eligible for the Saver's Tax Credit when they file their tax return. The Plan Administrator may amend Salary Deferral Contribution elections in order to satisfy required nondiscrimination tests. Before-Tax Contributions Before-Tax Contributions are made after Social Security taxes and before federal (and possibly state and local) income taxes are withheld from your pay. This approach reduces the amount you pay in taxes at the time of the contribution and may allow you to contribute more than if you could if you had to pay taxes upfront. Your tax savings will depend on your tax bracket and the amount of your Salary Deferral Contribution. These contributions and earnings are subject to income taxes when withdrawn from the Plan.

9 Roth 401(k) Contributions Roth 401(k) Contributions are made after Social Security and income taxes are withheld from your pay. Because Roth 401(k) Contributions are made after taxes have been withheld, they don t reduce your current taxable income the way Before-Tax Contributions do. However, Roth 401(k) Contributions and their associated earnings are not subject to taxation when taken as part of a Qualifying Distribution. There are no income restrictions to making Roth 401(k) Contributions and Roth 401(k) Contributions do not impact eligibility to contribute to a Roth IRA. Questions on eligibility for all IRAs should be directed to a financial advisor or tax professional. When You Leave the Company At retirement or termination of employment, salary deferral contributions are only taken from compensation if payroll records show you were an Employee on the last day of the payroll period. Example: Payday is 6/3/2011 and the last day of the payroll period is the preceding Friday 5/27/2011. If your last day of employment is 5/24/2011 and Payroll has received notice of your termination, a salary deferral contribution will not be taken from your 6/3/2011 paycheck. However, if your last day of employment is 5/31/2011, a salary deferral contribution will be taken from the 6/3/2011 paycheck. No salary deferral contribution would be taken from the next paycheck (representing payment from 5/28/2011 5/31/2011). In addition, salary deferral contributions are not eligible to be taken from the payment of any unused paid vacation (PV) and personal time (PT). QUALIFYING SALARY DEFERRAL CONTRIBUTIONS: Your Qualifying Salary Deferral Contribution is the amount up to which the Companies will match in the years they have a consolidated profit. The maximum Qualifying Salary Deferral Contribution amount, whether on a Before-Tax Contribution or a Roth 401(k) Contribution basis, is $900 per year. If you contribute less than your maximum Qualifying Salary Deferral Contribution, any Company Match will be based on your actual yearly salary deferral, not the maximum qualifying amount. COMPANY MATCHING CONTRIBUTIONS: If you make Qualifying Salary Deferral Contributions, the Company may make a matching contribution into your account. The Matching Contribution of the Companies is based on the smaller of:

10 5% of consolidated profit determined as of December 31 of the Plan Year reduced by any Salary Deferral Contributions made for that Plan Year, or The total of-- 1. Qualifying Salary Deferral Contributions made during the Plan Year on behalf of individuals who are Employees on the last workday of such Plan Year, and 2. Qualifying Salary Deferral Contributions made during the Plan Year on behalf of former Employees whose employment with the Companies has terminated on account of death, retirement, Total and Permanent Disability, or appointment as an Agent and who are deceased, retired, Totally and Permanently Disabled, or an Agent on December 31 of such Plan Year. Notwithstanding the preceding, the Board of Directors of the Company, in its sole discretion, may decide to make a Matching Contribution in excess of the preceding formula. The amount of Match you are eligible to receive is based on your Qualifying Salary Deferral Contributions that were made during the Plan Year. In order to receive a Match, if declared, you must be a State Farm Employee on the last workday of the year or an Employee who terminated employment during the year because of death, retirement, or Total and Permanent Disability, or appointment as an Agent and who is deceased, retired, Totally and Permanently Disabled or an Agent on December 31. No Matching Contribution of the Companies will be paid if employment is terminated for reasons other than those listed above. The Matching Contribution of the Companies is made on or before April 1 of the year following the Plan Year in which there is a Company Match. The Matching Contribution of the Companies will be invested in accordance with the investment option(s) in place at the time the Match is paid. The Company Match is not subject to taxation until it is distributed to you. NON-ELECTIVE CONTRIBUTIONS (NEC): On the first payday in February, all eligible Employees receive an annual $300 Non- Elective Contribution (NEC) from the Company. Eligible Employees receive this contribution whether or not they are making Salary Deferral Contributions. Employees who are at least 18 years old as of payend date for the first payday in February are eligible to receive the NEC. Also, individuals whose employment with the Companies has terminated during the Plan Year (prior to the payend date for the first payday in February) on account of death, retirement, Total and Permanent Disability or appointment as an Agent are eligible to receive the full $300 NEC. If the Employee is making Salary Deferral Contributions, the NEC will be invested in accordance with the investment option(s) in place at the time the NEC is paid.

11 If the Employee is not making Salary Deferral Contributions and has not previously selected an account into which contributions should be made, the Company will establish and contribute the NEC into an account for the Employee. The NEC will be invested in a Target Date Fund based on the year you will attain age 65. Employees can select a different investment account for the NEC at any time. The NEC is not subject to tax until it is paid to you. ROLLOVER CONTRIBUTIONS: If you previously participated in another employer s qualified retirement plan or an Individual Retirement Account (IRA), you may be able to move or roll over some or all of your money from that plan into your 401(k) Savings Plan Account. You choose how you want to invest your rollover contributions among the Plan s available investment options. They do not have to be invested in the same account as your current contributions. However, in the absence of an election or if the total percentages don t equal 100%, they will be defaulted to invest in the same accounts as your current contributions. If you re not currently contributing, they will be defaulted to invest in a Target Date Fund based on the year you will attain age 65. The following types of money are eligible for rollover into your 401(k) Savings Plan: Money currently in another employer s qualified plan (including Roth 401(k) amounts and after-tax contributions) Taxable money previously in another employer s qualified plan that was rolled over into an IRA Money from traditional tax-deductible IRAs Taxable rollovers from: o Section 403(b) tax-sheltered annuity plans o Section 457 deferred compensation plans of a state or local government entity o SIMPLE 401(k) plans o Section 403(a) annuity plans o Federal thrift plans under section 7701(j) o SIMPLE IRAs with at least two years of participation o IRA set up to receive a distribution from an eligible employer plan o SEP IRAs o SARSEP IRAs The following types of money are not currently eligible for rollover (based on Federal Law): Money from Roth IRAs Indirect rollovers Already taxed money from IRAs Required minimum distribution payments Money from a Hardship Withdrawal Money paid to you as a non-spousal beneficiary or non-spouse alternate payee

12 Amount of a plan loan that becomes a taxable deemed distribution because of a default cannot be rolled over. However, a loan offset amount is eligible for rollover. MAXIMUM ANNUAL ADDITION: The Internal Revenue Code limits the maximum annual addition to a Participant's account. The Plan Administrator will contact you if you exceed this limitation. INVESTMENT OF CONTRIBUTIONS: The Plan offers 14 different investment options with varying degrees of risk and return. You may contribute to one or more options at the same time using percentage allocations. The trustees have the power and authority to exercise all such rights (including voting), powers and privileges with respect to the assets held in the investment options. Here's an overview of the Plan's investment options. For more detailed information, visit the My State Farm 401(k) Savings Plan Resource Web site or call a Customer Service Representative at Target Date Investment Options The Target Date investment options are designed with a specific distribution date in mind (based on the year in which you intend to retire or begin taking withdrawals if later), as well as your risk and return goals. They are professionally managed portfolios and provide a balanced investment mix that may include U.S. stocks, international stocks, U.S. bonds (including Treasury Inflation-protected securities) and short-term reserves. The Target Date options are offered in 5-year increments so you can choose the Target Date Portfolio closest to your retirement year. Over time, as you get closer to retirement, your Target Date Portfolio will gradually and automatically reduce risk by shifting its investment mix from stocks to bonds and short-term reserves. Each portfolio s construction is described in the Holdings section and the Composition section of the Fact Sheets that can be obtained on the State Farm 401(k) Savings Plan SFnet site or via the My State Farm 401(k) Savings Plan Resource Web site at Investment management fees apply to these options. Information about these fees can also be found on the Fact Sheets. As of June 1, 2011, the Target Date investment options are: Income Portfolio, 2005 Portfolio, 2010 Portfolio, 2015 Portfolio, 2020 Portfolio, 2025 Portfolio, 2030 Portfolio, 2035 Portfolio, 2040 Portfolio, 2045 Portfolio, and 2050 Portfolio.

13 Equities, Balanced, and Fixed Income Accounts The Equities Account, Balanced Account, and Fixed Income Account offer you a choice of premixed combinations compatible with a certain level of risk. You determine your risk tolerance and then choose the corresponding investment option. These options are adjusted periodically to keep the intended mix of investments. Over time, you may consider shifting to a more conservative portfolio. Portfolio Strategies and Asset Allocation Income Portfolio The Income Portfolio is designed for participants who are over age 70 and already retired Portfolio The 2005 Portfolio is designed for participants who are age 66 to 70 and already retired Portfolio The 2010 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2008 and Portfolio The 2015 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2013 and Portfolio The 2020 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2018 and Portfolio The 2025 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2023 and Portfolio The 2030 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2028 and Portfolio The 2035 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2033 and Portfolio The 2040 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2038 and Portfolio The 2045 Portfolio is designed for participants who plan to retire and start withdrawing their account balance between 2043 and Portfolio The 2050 Portfolio is designed for participants who plan to retire and start withdrawing their account balance in 2048 or after. Equities Account The investment objective of the Equities Account is to achieve capital appreciation which preserves the real value of assets while realizing reasonable current income which grows over the years. Under normal

14 circumstances, assets are essentially fully invested in marketable common stocks and securities that are convertible into common stocks. The Equities Account invests approximately 97% of its assets in common stocks, with the remainder invested in cash and other holdings. Balanced Account The investment objective of the Balanced Account is moderate long-term growth of both capital (the amount invested) and income. The Balanced Account invests in common stocks and fixed income securities ("bonds") in varying proportions according to prevailing market conditions and the judgment of State Farm. The Balanced Account invests approximately 60% of its assets in common stocks and 40% in bonds. The Balanced Account ordinarily will not invest more than 75% of its total assets in either common stocks or bonds. The Account invests in bonds to provide relative stability of capital and income. Fixed Income Account The Fixed Income Account seeks the realization over a period of years of the highest yield consistent with relatively low price volatility. The Fixed Income Account invests in high quality debt securities with short- and intermediate-term maturities, including U.S. government and agency obligations; high quality corporate obligations; and high quality commercial paper and other money market instruments. The Fixed Income Account invests approximately 92% of its assets in fixed income securities, with the remainder invested in cash and other holdings. Valuation Day In general, the Investment Options are valued daily. Contributions into an Investment Option are valued on the day the Plan accepts them. Withdrawals are valued on the day the Record Keeper accepts notice of your intent to withdraw (if prior to 3:00 p.m. CT); or in the case of a Hardship Withdrawal or a Loan, the day of approval by the Record Keeper (if prior to 3:00 p.m. CT). However, if the day is one on which securities are not traded on the New York Stock Exchange, the Valuation Day will be the next day on which securities are traded. EARNINGS: For all investment options, earnings are accumulated in the current value of a unit instead of being distributed as dividends. All earnings will be reflected in a unit value. The total value of your account is the same as if earnings were distributed and reinvested into your account. CHANGE FUTURE INVESTMENTS: You can allocate future contributions (Salary Deferral Contributions, NEC and Company Match) by percentage to one or a combination of all investment options. An example is: 50% to Equities, 25% to Balanced, 25% to 2015 Portfolio. You may request a change of

15 allocation an unlimited number of times in a calendar month. Changes must be made by 3:00 p.m. (CT) to be processed on the day of receipt. TRANSFER MONEY BETWEEN INVESTMENT OPTIONS: You may request a transfer of funds in one investment option to another investment option on a daily basis. Changes must be made by 3:00 p.m. (CT) to be processed on the day of receipt. The Plan Administrator reserves the right to limit investment account transfers as it deems appropriate. If you transfer or reallocate $5,000 or more from an investment option to another investment option, you will not be able to transfer or reallocate any money back into that first investment option for 60 calendar days from the transaction date. However, new contributions may go into that option. SALARY DEFERRAL CONTRIBUTIONS CHANGE: You may increase, decrease, or discontinue your Salary Deferral Contribution at any time. Salary Deferral Contribution changes generally must be received by 11:59 p.m. (CT) on the Thursday of non-payday week to be effective on the next payday. Earlier cutoffs may be required due to company holiday processing needs or other circumstances. Example Payday is 6/17/11. Change request must be updated beginning 5/27/11 and by no later than 11:59 p.m. (CT) on Thursday, 6/9/11. AUTOMATIC CONTRIBUTION INCREASE: To help you save for a secure retirement, you can choose to have your contribution automatically increase by the percentage you designate (e.g., 1%, 2% or more) each year generally corresponding with your annual merit increase timing (e.g., February, April, or May). The election to take advantage of this feature must occur at least three months prior to the increase date to be effective. For example: If your annual salary review is effective April 11, you would have to elect the automatic contribution increase before January 11. Participants can elect the automatic increase feature at any time. This is an optional feature for participants currently contributing to the plan but is automatically applied when participants are enrolled using Automatic Enrollment and Quick Enrollment. Participants may opt out of this feature at any time. LOANS: Loans may be taken by any eligible employee. A general purpose loan can be taken for any reason, while primary residence loans are only available for the purchase of your primary residence. Both types of loans are secured by the remaining balance in your

16 account. The loan is required to be repaid through payroll deductions but may be paid off early by cashier s check, money order, or certified check. In certain situations (for example, employment transfer to Canada), manual repayment may be necessary. In this situation, you will be notified and provided loan repayment coupons to submit your payments. The following provisions set forth some of the rules established regarding Plan loans: A loan must be taken out before a hardship withdrawal can be requested, and both a general purpose loan and a primary residence loan must be taken before a hardship withdrawal for a home purchase can be requested. There is a $75 origination fee charged by the record keeper for each loan. General purpose loans have a minimum loan term of one month and a maximum length of 60 months. A primary residence loan has a minimum term of six months and a maximum of 120 months, and a signed form is required. Documentation and information required for a primary residence loan: o A home purchase agreement, sales contract, or construction contract dated within 30 days of receipt of the loan application reflecting all of the following information: The participant s name as the buyer of the primary residence Address, purchase price, amount of down payment, and closing date in the future Signatures of both the buyer and seller Only one loan of each type may be outstanding at a time. The interest rate is based on the Wall Street Journal published Prime Lending Rate plus 1%. The rate is reviewed quarterly (uses the Wall Street Journal rate in effect on the 15 th day of the month prior to the upcoming quarter) and changed on the 1 st business day of the quarter if needed. The loan uses whatever rate is in effect for that quarter and remains at that rate for the life of the loan. The minimum loan amount is $500 and the maximum loan amount is the lesser of $50,000 or 50% of your account balance. Florida residents are subject to a Florida Documentary Stamp Tax, which is a fee of $0.35 for every $100 borrowed. Participants on an unpaid leave of absence may have their loan repayments suspended for the lesser of one year or the period of the leave. If the unpaid leave of absence is longer than 12 months, manual loan repayments will be required. A Loan Repayment Coupon book will be mailed to the participant so payments may continue on a monthly basis. Upon return to work, payments will be re-amortized so that the payments are made within the term of the loan. Participants on military leave of absence may suspend repayments while on leave. This applies to both Military paid and unpaid leaves. At the end of the leave, the loan will be re-amortized and the due date of the loan will be extended by the length of the time of the service/leave.

17 Sources of contributions in a participant s account (i.e., Before-Tax Contributions, Company match, and etc) are depleted in a specific hierarchy. Loan payments are credited back to the account in the reverse order in which the account is depleted. This applies to principal only; interest is posted pro-rata. Loan payments are not eligible for a Company Match. Salary Deferral Contributions over loan payments are eligible for Company Match. How to Apply Loan applications can be completed for the general purpose loan or requested for the primary residence loan on the My State Farm 401(k) Savings Plan Resource Web site at This site is available 24 hours a day, seven days a week. Customer service representatives are also available to assist with your Loan requests at between 8 a.m. and 4 p.m. Central Time, Monday through Friday. If You Do Not Repay Your Loan If, for reasons other than employment termination, you do not make your scheduled loan payments as required under the terms of the Plan loan, your loan will become delinquent. If the delinquency is not repaid by the end of the cure period, your loan balance will be deemed as a distribution (and a taxable event) to you. The cure period is the end of the quarter following the quarter in which delinquency occurs. For example - on 1/31 a payment is missed. The cure period will end for this payment on 6/30. If the missed payment is not repaid by the end of the cure period, the outstanding loan becomes a taxable event (deemed distribution). If You Leave the Company If you leave State Farm, your outstanding loan(s) balance becomes due in full. To repay your outstanding loan(s), in full or in part, you have until the earlier of: 60 days after you leave the company; or The date you request distribution of your entire vested balance in the plan. You will receive a Separation from Employment Notice showing the amount you owe. To pay off your loans(s), send a cashier s check, certified check, or money order made payable to State Farm 401(k) Savings Plan and mail it to: State Farm 401(k) Plan Service Center 100 Half Day Road P.O. Box 1413 Lincolnshire, IL

18 If you leave State Farm and do not repay your outstanding loan(s) balance in full, the unpaid portion will be deemed as a foreclosure, and your loan(s) balance will be treated as a distribution and will be a taxable event to you. However, you may roll over an amount equal to the amount of your loan to another qualified employer plan or a traditional IRA within 60 days of when your loan became a taxable event. If you receive other cash payments from the Plan, the 20% federal tax withholding will be based on the entire amount paid to you, including the amount of the loan balance. The amount withheld will be limited to the amount of other cash paid to you. Please note: The amount of a loan foreclosure is your outstanding principal balance plus any interest on the loan repayments you missed through the date you left the company. If You Transfer to an ESP or SAA Employee, or to Canada If you become an employee under the Emergency Services Program (ESP) or Staff Assistance Agreement (SAA), your loan payments will continue to be taken through payroll deductions. If you transfer to the Canadian office, your loan payments through U.S. payroll deductions will stop. A Loan Repayment Coupon Book will be mailed to you in order to submit your loan payments manually until the loan is repaid in full. If you transfer back to the U.S., your loan payments via U.S. payroll deductions will resume. WITHDRAWAL OF CONTRIBUTIONS: In general, you cannot take a withdrawal or distribution from the 401(k) Savings Plan while you are still working for the Company. However, under certain circumstances, you may be able to withdraw some of the current value of your account. There are eight types of withdrawals/distributions from the 401(k) Savings Plan: Non-Hardship Withdrawal Roth 401(k) Rollover Withdrawal Rollover Withdrawal Hardship Withdrawal Age 59 ½ Withdrawal Age 59 ½ Roth Withdrawal Qualified Military Reservist Distribution Active Military Withdrawal Taxation of the distribution depends on how the contributions were made and the reason for the distribution. If you take a distribution prior to age 59 1/2, the amounts withdrawn may be subject to an additional 10% tax when you file your federal income tax return. You can request withdrawals by accessing the My State Farm 401(k) Savings Plan Resource Web site at Only those withdrawals available to you will be displayed on the web site. This site is available 24 hours a day, seven days a week. Customer Service Representatives are also available to

19 assist you with withdrawal requests at between 8 a.m. and 4 p.m. Central Time, Monday through Friday. Non-Hardship Withdrawal After-tax contributions and Tax Deductible Contributions can no longer be made. However, participants who previously made after-tax contributions or designated 1982 or 1983 amounts as tax deductible contributions (IRAs) may withdraw part or all of the current market value of their after-tax contributions and tax deductible contributions, including accumulated earnings on these contributions. Upon proper request to the Record Keeper, you may withdraw any available Non- Hardship Contributions. A withdrawal cannot be less than the lesser of $500 or the total amount available for withdrawal. If you withdraw amounts which have already been taxed, the Plan will not report the withdrawn amount as taxable income. If you withdraw amounts not already taxed, the Plan will report this amount as ordinary taxable income in the year you receive payment. If you take the distribution prior to age 59 1/2, an additional 10% tax on the taxable portion of the withdrawal may be due when you file your federal income tax return. Withdrawal of Roth 401(k) Rollover Contributions Upon proper request to the Record Keeper, you may withdraw any Roth 401(k) Rollover Contributions. A withdrawal cannot be less than the lesser of $500 or the total amount available for withdrawal. Withdrawal of Rollover Contributions Upon proper request to the Record Keeper, you may withdraw Rollover Contributions (including any after-tax rollovers). A withdrawal cannot be less than the lesser of $500 or the total amount available for withdrawal. Hardship Withdrawal You must obtain all other available distributions and all nontaxable loans which became available under the Plan before being eligible for a Hardship Withdrawal. You may obtain a Hardship withdrawal if you demonstrate financial hardship of at least $500* for one of the following reasons:

20 1. Expenses for (or necessary to obtain) medical care as defined in Section 213(d) of the Internal Revenue Code, for you, your spouse, your "dependents", or your primary beneficiary or beneficiaries under the Plan, 2. Payment of tuition, related educational fees, and room and board expenses for up to 12 months of post-secondary education for you, your spouse, children, your "dependents", or your primary beneficiary or beneficiaries under the Plan, 3. Costs directly related to the purchase of your principal residence excluding mortgage payments, 4. Payments necessary to prevent eviction from or foreclosure on your principal residence, 5. Payments for burial or of funeral expenses for the participant s deceased parent, spouse, children, your "dependents", or your primary beneficiary or beneficiaries under the Plan, 6. Expenses for the repair of damage to your principal residence due to an identifiable event that is sudden, unexpected, or unusual that would qualify for the casualty deduction under Internal Revenue Code Section 165. Your dependents are any persons described as dependents in Section 152 of the Internal Revenue Code. In general, to be a dependent for these hardship reasons, the individual must be either a qualifying child or qualifying relative: 1. A qualifying child must (1) be related to the participant as either a child, sibling, or descendent of such individual; (2) be under the age of 19 (24 if a student) or permanently and totally disabled; (3) not provide over ½ of his/her own support; and (4) live with the participant for more than half of the year, 2. A qualifying relative is an individual (1) who is related to the participant (broad relationship test-child, sibling, parent, in-law); (2) for whom the participant provides over ½ of the individual s support for the year; and (3) who is not a qualifying child of someone else. A qualifying relative can also be (1) an individual (not necessarily related) to the participant; (2) who for the year has the same principal place of abode as the participant and is a member of the participant's household; (3) for whom the participant provides over ½ of the individual's support for the year; and (4) is not a qualifying child of anyone else. *The hardship expense itself and the amount available for hardship must be at least $ To obtain a Hardship withdrawal, you must: 1. Request and complete an Application for Hardship Withdrawal, 2. Provide acceptable third-party documentation of the immediate and heavy financial need, 3. Satisfy the Record Keeper that the amount of withdrawal is limited to the money necessary to meet the hardship and the amount needed to pay any federal or state, or local income taxes or penalties which are reasonably anticipated to result from the distribution, and

21 4. Satisfy the Record Keeper that the money is not reasonably available from other sources. 5. Secure any available loan(s) from the Plan prior to requesting a hardship. In a Hardship withdrawal, you may withdraw Salary Deferral Contributions plus related earnings credited to your account as of December 31, 1988 as well as Salary Deferral Contributions made after this date. Also, you may withdraw Matching Contributions plus related earnings credited to your account as of December 31, Age 59 ½ Withdrawal Upon proper notice to the Record Keeper and if you have attained age 59 ½, you may request a withdrawal of all or part of the current value of your account balance in the Plan, exclusive of Roth 401(k) Rollover Contributions and Roth 401(k) Contributions, (determined as of the Valuation Day), whether or not you have suffered a hardship. A withdrawal cannot be less than $500. Age 59 ½ Roth 401(k) Withdrawal Upon proper notice to the Record Keeper and if you have attained age 59 ½, you may request a withdrawal of all or part of the current value of your Roth 401(k) Rollover Contributions and Roth 401(k) Contributions in the Plan (determined as of the Valuation Day), whether or not you have suffered a hardship. A withdrawal cannot be less than $500. Qualified Military Reservist Distribution Military reservists called to active duty for at least 180 days or for an indefinite period may request a distribution of their Before-Tax Contributions and earnings. A withdrawal cannot be less than $500. While the distribution is subject to regular income taxation, the 10% early-distribution tax does not apply. In addition, you may rollover this distribution back into the Plan within 3 years of receiving it. Please see your tax preparer or accountant for detailed questions regarding your personal situation. Active Military Withdrawal If you perform services in the uniformed services for a period in excess of 30 days, and upon proper request to the Record Keeper, you may withdraw your Before-Tax Contributions and earnings. A withdrawal cannot be less than $500. In addition, your contributions will be automatically suspended as you may not make Salary Deferral Contributions during the 6-month period following the distribution. Following the 6-month suspension, you will be notified of your eligibility to resume your contributions.

22 If you are eligible for both the Active Military Withdrawal and the Qualified Military Reservist Distribution and you request an Active Military Withdrawal, your withdrawal will be treated as a Qualified Military Reservist Distribution. SETTLEMENT OPTIONS: The Plan offers different Settlement Options based on the account balance and the reason employment ended. The Settlement Options include Settlement at Termination Settlement at Retirement Settlement at Disability Settlement at Death Please note, if the account balance is $5,000 or less, the account balance will be distributed regardless of the reason for the employment termination. See the rules set forth in Small Distribution Settlement section. Taxation of the distribution depends on how the contributions were made and the reason for the distribution. If you take a distribution prior to age 59 1/2, the amounts withdrawn may be subject to an additional 10% tax when you file your federal income tax return. You can request the distributions by accessing the My State Farm 401(k) Savings Plan Resource Web site at This site is available 24 hours a day, seven days a week. Customer service representatives are also available to assist with your distribution requests at between 8 a.m. and 4 p.m. Central Time, Monday through Friday. Small Distribution Settlement If your account balance is $5,000 or less, your account balance will be distributed from the Plan. You have 60 days after your termination notice is received by the Record Keeper to have your account balance either: Paid in a Direct Rollover to your IRA or other qualified plan Paid to you in cash (less applicable income tax withholding) Unless you elect otherwise, the Record Keeper will pay you all after-tax contributions in cash. If you do not make a proper election and the market value of your account is $1,000 or less, at the time of distribution, your account will be distributed to you in cash. If you do not make a proper election and the market value of your account is greater than $1,000 and no more than $5,000 at the time of distribution, the Plan is required by law to make a direct rollover of your account to an IRA. Therefore, in this situation, your distribution will be processed as an Automatic Rollover to a State Farm Bank Traditional IRA. Your IRA account balance will be invested in an investment product designed to preserve principal and provide a reasonable rate of return and liquidity. Any fees and expenses of the IRA will be charged against the assets held in the IRA. At any time, you can redirect

23 the investment of this IRA, roll over the IRA assets to another IRA, or take a distribution from the IRA, subject to any applicable tax consequences. The following categories of payments will be considered separately in determining whether the eligible rollover distribution is greater than $1,000 and less than or equal to $5,000: 1) after-tax contributions; 2) Roth 401(k) Contributions and Roth 401(k) Rollover Contributions; and 3) all other amounts. Example: If the $2,000 in your account includes $1,500 Before-Tax Contributions and $500 of Roth 401(k) Contributions, each amount will be looked at separately to determine if it meets the $1,000 threshold. If you did not elect otherwise, the $1,500 Before-Tax amount will be rolled over to a State Farm Bank Traditional IRA, and the $500 amount would be paid to you in cash. Note: The sum of all money is looked at to determine if it meets the $5,000 threshold. You can contact the State Farm 401(k) Plan Service Center at 100 Half Day Road, P.O. Box 1413, Lincolnshire, Illinois or at for further details regarding the Automatic Rollover process, the State Farm Bank Traditional IRA, and the fees and expenses applicable to the IRA. Special Notice Regarding the Sharing of Certain Information with State Farm Bank for Automatic Rollovers This notice applies only to the sharing of information with State Farm Bank that does not involve your transactions or experiences with us. What Information We Share: Unless you affirmatively elect a different option in the event of an involuntary distribution, we may share information with State Farm Bank that was obtained from your account, such as your balance, your address, and your phone number; or information obtained from a consumer report, such as your credit history and your social security number. Why We Share: We may share information about you with State Farm Bank to affect the rollover of your account to a State Farm Bank Traditional IRA account. Settlement at Termination If you terminate your employment with State Farm and your total account balance is greater than $5,000, you may elect: Direct Rollover to your IRA or other qualified plan Full distributions of your account (less applicable income tax withholding) Partial distribution of your account (less applicable income tax withholding) o Part or all of the value of your account balance (exclusive of Roth amounts) or o Part of all of the value of your Roth amounts