50 Years of Excellence in Retirement Solutions. Pen-Cal Executive Benefits Services Overview

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1 50 Years of Excellence in Retirement Solutions Pen-Cal Executive Benefits Services Overview 2014

2 Pen-Cal Overview Celebrating more than 50 years of excellence We are the leader in the design, implementation, and administration of executive benefit plans Pen-Cal provides a very high touch, concierge service to plan participants and sponsors Some of our clients include: 2

3 Pen-Cal Overview Our consulting platform offers a robust, proprietary suite of funding solutions, systems and services to enhance plan value and participant experience We work with public and privately held organizations and currently service a number of Fortune 100 companies Our strategic approach and custom crafted systems focuses on six key components: 3

4 Pen-Cal Platform Access to 26,000+ mutual funds representing over 360 fund families (SEC-22c-2 Compliant) Same day/late day trading and asset rebalancing Mutual Funds ETF s & No Load Funds COLI linked to 9 COLI carriers Total Return Hedge and Swaps Unbiased and flexible to handle any investment or proxy fund *Only nonqualified firm in country that truly rebalances assets to liabilities on a same day/late day automated trading basis 4

5 Administration Services & Financial Reporting 5

6 409A Administration Online Participant & Plan Sponsor Access Daily Online Participant Trading Capability Daily Account Reconciliation & Asset Rebalancing Contribution Processing Class Year Tracking Withdrawal/Installment Tracking Distribution Election Management & Processing Vesting Tracking Unique Source Tracking Monthly Accounting Entries No tolerances or periodic rebalancing; eliminates our clients from underwriting market volatility 6

7 Corporate Accounting Our accounting reports contain clear and concise data points to assist our clients to properly tackle financial reporting of nonqualified plans Standard reports include: Asset & Liability at the plan and participant level Suggested accounting entries Distribution projections for corporate cash flow Asset/Liability Chart Asset/Liability Comparison Suggested Accounting Entries 7

8 Participant Website Reports are available on demand, 24/7/365 at Participant statements are posted to our website The following information and tools are also available online: Plan Document Summary Plan Description Frequently Asked Question and Answer Sheet Online Enrollment and Distribution & Deferral Election History Allocation Summary Ability to change deferrals, distributions, and beneficiary elections 409A Investment Synchronization Tool Rebalance Portfolio View Personal Rates of Return Fund Fact Sheets Internet and VRU transaction history Retirement Calculators Pen-Cal Wealth Management System 8

9 Plan Sponsor Website Reports are available on-demand, 24/7/365 via Corporate Access Plus (CAP) Quarterly, we post your administrative reports to our website for you to download (Sample Corporate Report) The following reports are provided and are also customizable: Summary of Accounts by Employee Census by Category Summary of Account by Investments Contribution Analysis Daily Asset Reconciliation Monthly Investment Performance Reports Monthly Accounting Entries Sample Rabbi Trust Report Participant Statements (with rate of return) Executive Summary Report Reports are exportable to Excel, PDF, Text ASCII, Word 9

10 Education & Communication 10

11 Pen-Cal Education Program Enrollment Kit (Hardcopy & Electronic) Enrollment Workshops Pen-Cal maximizes benefits for plan participants Post Enrollment Communications Event-Based Communications Interactive Portfolio Analysis 11

12 Enrollment Kits All eligible participants receive comprehensive enrollment materials which include: Welcome Letter Summary Plan Description PowerPoint Slide Presentation Questions & Answers Plan Document Enrollment Forms Investment Materials Fund Analytics Data 12

13 Enrollment Workshops Our workshops are designed to accommodate the challenges of a global workforce. Combining several different media elements together helps to improve participation in the plan: Onsite WebEx Teleconference Recorded presentations stored on our website Pen-Cal Workshop Instructors roll out tools and materials to help participants make informed decisions about their plans specific investments and outside assets. Workshops are targeted to newly eligible participants or participants who are not currently deferring. 13

14 Post Enrollment Communication Communication directed to active participants and those that are eligible but have yet to enroll: Participant statements Investment performance & capital market commentary Online technology training Upcoming distribution election reminders Investment seminars 14

15 Event Based Communication Life and Plan Events frequently occur and we have honed this process over our 50+ years of working with plan sponsors and NQDC plan participants Communications are designed to apprise them of how such events may affect their retirement and short-term savings goals Some examples of events we typically encounter: Plan investment option changes Plan design modifications Upcoming distribution pushback reminders Executive compensation legislative updates 409A regulatory updates Merger & acquisitions (if applicable) Upcoming enhancements to Pen-Cal Statements & Web Technologies Current global and domestic events which might have potential investment or plan risk 15

16 Newsletters & Legislative Updates Periodic Plan Sponsor Newsletters keep clients educated on the latest retirement plan news, legislative updates, and industry trends Contributing writers and editors represent a staff of professionals with average industry tenure > 20 years Modifications to your plan document and communication materials as a result of regulatory or elective changes can be handled by your appointed counsel or Pen-Cal s. 16

17 Interactive Participant Portfolio Analysis Service

18 What is My Path? An interactive participant portfolio analysis service delivered in real time designed to provide the following: Comparison of the current risk and return Assist with modeling the cash flows while participating and after retirement Creates portfolios based on the timing of distributions and risk tolerances Identifies best election decisions Provides Monte Carlo simulations to test the probability of achieving the wealth targets 18

19 Asset Allocation Analysis Current Asset Allocation Details Proposed Asset Allocation Details Cash Fidelity Advisor Growth & Income A Davis NY Venture A Goldman Sachs Concentrated Intl Eq A American Funds Bond Fund of Amer A Vanguard Total Stock Mkt Idx Signal Vanguard Total Bond Market Index Signal PIMCO Total Return A PIMCO Low Duration A Columbia Dividend Income A MFS International Value A Pioneer Emerging Markets A Templeton Global Bond A T. Rowe Price Mid-Cap Growth Cash Fidelity Advisor Growth & Income A Davis NY Venture A Goldman Sachs Concentrated Intl Eq A American Funds Bond Fund of Amer A Vanguard Total Stock Mkt Idx Signal Vanguard Total Bond Market Index Signal PIMCO Total Return A PIMCO Low Duration A Columbia Dividend Income A MFS International Value A Pioneer Emerging Markets A Templeton Global Bond A T. Rowe Price Mid-Cap Growth Current Proposed Objective (Return), % Risk (StDev Rtn), % Sharpe Ratio Created with mpi Stylus Markov Processes International LLC. All Rights Reserved. Data provided by Morningstar, Inc. The information contained herein: (1) is proprietary to MPI and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. MPI is not responsible for any damages or losses arising from any use of this 19

20 Probabilities & Cash Flows Provides Monte Carlo simulations to test the probability of achieving the wealth targets Model Participant s cash flows during participation and after retirement 20

21 The Power of $201,940 $140,380 Asset Allocation Annualized Return, % Cumulative Return (%) Annualized StdDev, % Current Using MyPath Example - Past performance is no guarantee of future results. 21

22 Portfolio Report 22

23 The Pen-Cal Difference Privately Held & Stable We have been a profitable, privately held corporation since being founded in Plan Funding/Hedging Independent Using the Pen-Cal Process, we explore all funding alternatives without any prejudice, and offer our clients the full universe of COLI products and or taxable investments available without recommending or favoring any insurance carrier or taxable investment over another. Open Architecture Funding & Trading Platform We are SEC 22c-2 compliant & have access to the entire mutual fund universe (26,000+ funds) and are linked to trade and rebalance them on a same day/late day trading basis. Additionally we are linked to nine (9) corporate owned life insurance carriers to also trade daily on an automated same day/late day basis. Reconciling & trading assets and plan liabilities on a daily automated basis makes us unique. As opposed to our peers who only rebalance to tolerances or other periods such as monthly and quarterly. By taking advantage of this unique Pen-Cal capability, we eliminate unnecessary market volatility exposure to our client s balance sheet. NQ Stable Value Fund Access The only nonqualified plan administrator able to deliver The Standard NQ Stable Asset Fund Q Institutional crediting rate of 2.50%. Pen-Cal Wealth Management System This system allows plan participants to aggregate their assets & liabilities from more than 3,80 0 financial institutions, store private documents in a secure online vault, track various award programs, and create a total wealth statement. A real time, interactive participant portfolio analysis service. 23

24 Disclaimer/Disclosure a) As long as they are a highly compensated employee or part of a select group of management as defined by the Top-Hat exemption of ERISA (the Employee Retirement Income Security Act of 1974). b) An informational letter may be required to be filed with the Department of Labor; in addition, an IRC Sec. 101(j) notice and consent form may be required with the business s income tax return. c) Except for mortgage interest, per IRC Section 163(h) interest on indebtedness is not deductible by individuals. Businesses, however, per IRC Section 163(a) may generally deduct interest on indebtedness. Nevertheless, some limitations to a business deductibility of interest may apply if the indebtedness is for life insurance policy premiums. Two of the more common limitations are: (1) per IRC Section 264(a) (2) a business may not deduct the interest on indebtedness incurred to purchase or carry a single premium life insurance policy; and (2) per IRC Subsection 264(a)(4) & (e) assuming it is not a single premium policy and it insures a key person, a business may deduct the interest on the first $50,000 of indebtedness. IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed herein. d) Insurance product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance products and their guarantees, including optional benefits and any fixed subaccount crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as these guarantees are not backed by the broker-dealer, insurance agency or their affiliates from which this product is purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the life insurance company. Investments Investment objectives and strategies vary among fund, and may not be similar for funds included in the same asset class. All definitions are typical category representations. The specific share classes or accounts identified above may not be available or chosen by the plan. Share class and account availability is unique to the client s specific circumstances. There may be multiple share classes or accounts available to the client from which to choose. All recommendations are subject to vendor/provider approval before implementation into the plan. The performance data quoted may not reflect the deduction of additional fees, if applicable. If reflected, additional fees would reduce the performance quoted. Performance data is subject to change without prior notice. Performance of indexes reflects the unmanaged result for the market segment the selected stocks represent. Indexes are unmanaged and not available for direct investment. The information used in the analysis has been taken from sources deemed to be reliable, including, third-party providers such as Markov Processes International, Morningstar, firms who manage the investments and /or the retirement plan providers who offer the funds. Every reasonable effort has been made to ensure completeness and accuracy; however, the final accuracy of the numbers and information is the responsibility of the investment manager(s) of each fund and/or the retirement plan providers offering these funds. Discrepancies between the figures reported in this analysis, and those reported by the actual investment managers and/or retirement plan providers, may be caused by a variety of factors, including: Inaccurate reporting by the manager/provider; Changes in reporting by the manager/provider from the time this report was prepared to a subsequent retro-active audit and corrected reporting; Differences in fees and share-classes impacting net investment return; and, scriveners error. The enclosed is intended for plan sponsor and/or institutional use only. The materials are not intended for participant use. The purpose of this report is to assist plans in selecting and monitoring investment options. Neither past performance nor statistics calculated using past performance is a guarantee of a fund s future performance. Fund selection is at the discretion of either the plan sponsor or the committee appointed to perform that function. Carefully consider the investment objectives, risk factors and charges and expenses of the investment company before investing. This and other information can be found in the fund s prospectus, which may be obtained by contacting your Investment Advisor/Consultant or Vendor/Provider. Read the prospectus carefully before investing. For a copy of the most recent prospectus, please contact your Investment Advisor/Consultant or Vendor/Provider.