Compensation, Retirement, and Benefits Trends Report Findings and Benchmarking

Compensation, Retirement, and Benefits Trends Report Findings and Benchmarking 2016/2017 Edition 1 newportgroup.com For informational use only.

Introduction In today's economy, employee benefits remain a crucial factor in the recruitment and retention of talented and valuable workers. The challenge for employers is keeping their benefit packages current and in line with their peer companies, while still aligned with this overarching goal. Newport Group s annual Compensation, Retirement, and Benefits Trends Report is designed to reveal key trends across a full range of compensation, retirement, and health and welfare benefits programs. Data was gathered from hundreds of for-profit and non-for-profit firms across the nation, covering a wide range of industries from finance and real estate to healthcare and insurance from retail and transportation to manufacturing and distribution. Data was compiled and analyzed by Newport Group s compensation consultants for presentation here and in our full report. 2 newportgroup.com

2016/2017 Compensation, Retirement and Benefit Trends Report DEMOGRAPHICS 3 newportgroup.com

Demographics Organizations by Full-Time Equivalent (FTE's) 3% 9% 16% 51% 21% <100 101-250 251-750 751-1500 >1500 N=410 4 newportgroup.com

Demographics Key Definitions Organization Locations Northeast New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont Middle Atlantic: New Jersey, New York and Pennsylvania Midwest East North Central: Illinois, Indiana, Michigan, Ohio and Wisconsin 33% 19% West North Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota South South Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia East South Central: Alabama, Kentucky, Mississippi and Tennessee 30% 42% West South Central: Arkansas, Louisiana, Oklahoma and Texas West Mountain: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming Pacific: Alaska, California, Hawaii, Oregon and Washington Northeast Midwest South West N=419 5 newportgroup.com

2016/2017 Compensation, Retirement and Benefit Trends Report COMPENSATION PRACTICES 6 newportgroup.com

Base Salary Increases QUESTION: Please indicate the AVERAGE percentage amount allocated for base salary increases in 2016 and the amount anticipated for 2017, as a percent of base pay. Identical to the past many years, median salary increases for executive, salaried and hourly non-exempt workers remained at 3.0 percent median increase. Budgeted Salary Increase (Average) Budgeted Salary Increase (Median) 4.0 3.5 3.0 3.5 3.1 3.8 3.4 3.4 3.0 3.50 3.00 2.50 3.0 3.0 3.0 3.0 3.0 3.0 2.5 2.00 2.0 1.5 1.50 1.0 1.00 0.5 0.50 0.0 Executives Salaried (Exempt) Hourly (Non- Exempt) 2016 Actual Base Salary Increases (%) 2017 Anticipated Base Salary Increases (%) N=388 0.00 Executives Salaried (Exempt) Hourly (Non- Exempt) 2016 Actual Base Salary Increases (%) 2017 Anticipated Base Salary Increases (%) N=388 7 newportgroup.com

Base Salary Increases for 2016 by FTE s QUESTION: Please indicate the AVERAGE percentage amount allocated for base salary increases in 2016. Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Executives % % % % % % Average 3.5 4.0 2.6 3.3 2.9 3.2 Median 3.0 3.0 2.9 3.0 3.0 3.0 N (number of respondents) 375 181 79 59 12 36 Salaried (Exempt) Average 3.8 3.9 3.0 3.0 2.8 4.7 Median 3.0 3.0 3.0 3.0 3.0 3.0 N (number of respondents) 381 183 80 61 12 37 Hourly (Non-exempt) Average 3.4 3.9 3.2 3.0 2.6 3.0 Median 3.0 3.0 3.0 3.0 2.9 3.0 N (number of respondents) 376 179 80 60 12 37 8 newportgroup.com

Current Salary Out of Bounds During Job Interview Women on average earn 79% of what men earn, according to federal government data. Massachusetts passed pay equity legislation, which bans employers from asking a job candidate about their salary history. The law goes into effect in 2018. Similar legislation is being introduced in other major cities A candidate's salary should not be based on their previous salary history» Rather it should be based on the candidate's skills and experience and how those align with internal equity The war for talent will continue and firms need to be able to flex and adapt to these new policies that are employee focused. Viewpoint: Current Salary Should Be out of Bounds During Job Interview, Craig Fisher. SHRM. Mar 6, 2017 9 newportgroup.com

Salary Structure by FTE s QUESTION: Do you have a formal salary structure (i.e., ranges with a minimum and maximum) to manage compensation across levels within the organization? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Yes 47% 33% 55% 60% 77% 76% No 53% 67% 45% 40% 23% 24% N (number of respondents) 421 209 85 65 13 38 10 newportgroup.com

Salary Range/Structure Movement QUESTION: Please indicate the percentage salary range/structure movement for 2016 and the amount anticipated for 2017. Salary structures are anticipated to remain identical in 2017 compared to 2016. This was consistent across all employee groups. Salary Range/Structure Movement (Average) 2.8 2.7 2.6 2.7 2.6 Salary Range/Structure Movement (Median) 2.5 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.5 2.4 2.3 2.3 2.3 2.4 2.4 1.5 1.0 2.2 2.1 0.5 2.0 Executives Salaried (Exempt) Hourly (Non- Exempt) 0.0 Executives Salaried (Exempt) Hourly (Non- Exempt) 2016 Actual Salary Structure Adjustments 2017 Anticipated Salary Structure Adjustments N=161 2016 Actual Salary Structure Adjustments 2017 Anticipated Salary Structure Adjustments N=161 11 newportgroup.com

Pay for Performance Increases QUESTION: In general, please indicate the average base salary increases in 2016 for each of the following categories: Increasingly, dollars continue to be allocated to differentiate high performers and less money is being utilized, as a percent of payroll, to reward low performers. While salary budgets increased 3 percent, higher performers received approximately a 4.6 percent adjustment. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 High Performers 4.6 Satisfactory Performers 2.7 Low Performers 1.2 QUESTION: In general, please indicate the median base salary increases in 2016 for each of the following categories: High Performers 4.0 Satisfactory Performers 3.0 Low Performers 1.0 N=369 12 newportgroup.com

13 newportgroup.com GRHRA 13

Literature Review Harvard Business Review: Deloitte ~ Reinventing Performance Management» The FOUR Questions: Given what I know of this person s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus (measures overall performance and unique value to the organization on a five-point scale from strongly agree to strongly disagree ) Given what I know of this person s performance, I would always want him or her on my team (measures ability to work well with others on the same five-point scale) This person is at risk for low performance (identifies problems that might harm the customer or the team on a yes-or-no basis) This person is ready for promotion today (measures potential on a yes-or-no basis) 14 newportgroup.com GRHRA 14

Short-Term Incentive by Industry QUESTION: Which employee groups are eligible to participate in a short-term incentive or bonus program? Incentive Eligibility by Employee Group and Industry Overall Manufacturing, Distribution, Utilities, Technology, & Transportation Not-for-Profit, Education, & Government Construction & Real Estate Other Services, Professional Services, Restaurant, & Retail Finance, Banking, & Insurance Healthcare Hourly Production 61% 60% 57% 68% 53% 71% 69% Office Professional 68% 76% 65% 79% 62% 67% 59% Supervisory 71% 79% 76% 84% 64% 64% 56% Management 81% 89% 76% 84% 79% 80% 59% Executive 77% 83% 86% 74% 73% 73% 69% N (number of respondents) 313 103 37 19 77 45 32 15 newportgroup.com

Short-Term Incentive Award Opportunity QUESTION: What is the targeted short-term incentive pay opportunity at your company for 2017? Targeted levels of short-term incentive for 2017 are highest for executives with an average of 23 percent of base pay. Hourly production employees had a target opportunity of 6 percent which is twice as much as the average base salary increase. Targeted Short-Term Incentive Pay Opportunity for 2017 (Average) Targeted Short-Term Incentive Pay Opportunity for 2017 (Median) Executive 23% Executive 15% Management 14% Management 10% Supervisory 9% Supervisory 8% Office Professional 8% Office Professional 5% Hourly Production 6% Hourly Production 5% 0% 5% 10% 15% 20% 25% N=223 0% 5% 10% 15% 20% 16 newportgroup.com

Long-Term Incentive Vehicles by FTE s QUESTION: Which long-term incentive vehicles are offered to eligible employees? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Stock Options 23% 17% 16% 18% 57% 41% Stock Appreciation Rights 4% 0% 4% 12% 0% 4% Phantom Stock 4% 4% 8% 3% 0% 4% Performance Units 14% 7% 8% 9% 0% 52% Restricted Stock 22% 4% 20% 30% 14% 59% Other 58% 73% 64% 52% 29% 22% N (number of respondents) 168 71 25 33 7 27 17 newportgroup.com

FABulous Pay Improves Talent Acquisition F.A.B. F = Feature A = Advantages B = Benefits Features are the basic facts about your pay elements and their unique components. They are simply factual descriptions. Example: Our pay philosophy is to offer moderate base pay with and industry-leading potential for incentive pay. Advantages are the unique aspects of each feature. Every feature will have anywhere from one to many advantages (the list will grow overtime.) Advantages are facts that add color(s) to each feature. Example: Our pay philosophy allows us to ensure our best employees are paid for excellent performance.» Continued 18 newportgroup.com

FABulous Pay Improves Talent Acquisition Continued Benefits Are the real winning elements of this approach. Every advantage will have anywhere from one to endless benefits. Benefits are the things that allow a personal link from the individual's needs and/or desires to your company s pay plans. These are often referred as What s In It For Me. When you can demonstrate what you are offering was designed specifically to meet their needs, you lower barriers and raise both curiosity and understanding. Example: Robert, we are recruiting you because you have proven to be a high performer. Our pay philosophy was designed to ensure your pay will always reflect your exceptional skill and talent. Using this method helps build trust between your talent professional and the individual, and that you can communicate your pay plans are designed for them Walter, Dan. "FABulous Pay Improves Talent Acquisition." CompensationCafe. N.p., 4 Aug. 2016. Web. 19 newportgroup.com

2016/2017 Compensation, Retirement and Benefit Trends Report RETIREMENT PLANS 20 newportgroup.com

Retirement Plan Options QUESTION: What type of retirement plan(s) do you offer? The results of the 2016-2017 survey are consistent with past findings, showing the large majority (94%) of employers offer a defined contribution plan. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Defined Contribution - Employee Contribution 84% Defined Contribution - No Employee Contribution Defined Benefit - Traditional 10% 10% Defined Benefit - Hybrid ESOP - Employee Contribution 2% 3% ESOP - No Employee Contribution 8% Simple 5% N=392 21 newportgroup.com

Retirement Plan Contribution QUESTION: How does the projected retirement planning contribution compare to last year? (Please select one) The large majority (75%) of employers project their retirement plan contribution will remain the same as the previous year. Across all sizes of organizations and industries though, approximately 18% of employers expect to increase their contribution as compared to the previous year. 0% 10% 20% 30% 40% 50% 60% 70% 80% Staying the same 75% Increasing 18% Decreasing Suspending Do not match Do not have a plan 2% 0% 3% 2% N=409 22 newportgroup.com

Retirement Plan Automatic Enrollment by FTE s QUESTION: Does your plan have an automatic enrollment feature? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Yes 43% 34% 48% 58% 31% 61% No, but planning to next year 2% 2% 1% 0% 0% 3% No, but considering for the future 18% 23% 11% 17% 15% 11% No, and not considering for the future 37% 41% 40% 25% 54% 26% N (number of respondents) 421 209 85 64 13 38 23 newportgroup.com

Retirement Plan Automatic Escalation QUESTION: If you have or are planning to add an automatic enrollment feature, will your auto enrollment include an automatic escalation feature? Slightly less than one-third of respondents whose plans have an automatic enrollment feature, also have an automatic escalation feature (27 percent) with over 32 percent considering for the future. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Plan has automatic escalation 27% No, but planning to add next year 2% No, but considering for the future 32% No, not considering for future 39% N=264 24 newportgroup.com

Evaluating Retirement Plan Services QUESTION: Which of the following factors is MOST important in evaluating retirement plan offerings? (Please rate by level of importance, with 1 being the most important and 6 being the least important) In 2016, employers focused most on the level and quality of services offered. The cost of investments follow close behind in importance to employers. 0% 5% 10% 15% 20% 25% 30% 35% Cost of investments 24% Cost of service 13% Level/quality of service 33% Number of investment options 7% Reputation of the provider 13% Recommendation of advisor 10% N=293 25 newportgroup.com

Financial Wellness Programs QUESTION: Has your company implemented "financial wellness" (financial literacy and education) programs to help employees prepare for current and future financial needs whether separately or as part of the overall health and wellness program? Approximately one-third of organizations (34 percent) have implemented a financial wellness program to help employees prepare for current and future financial needs with another 23 percent planning to implement financial wellness programs. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Yes, have already implemented 34% No, but planning to implement 23% No, no plans to implement 43% N=404 26 newportgroup.com

Non-Qualified Deferred Compensation Plans by FTE s QUESTION: Do you offer a Non-Qualified Deferred Compensation or Non-Qualified Benefit program? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Yes 24% 13% 15% 40% 38% 76% No 76% 87% 85% 60% 62% 24% N (number of respondents) 421 209 85 65 13 38 27 newportgroup.com

Non-Qualified Deferred Compensation Plans Eligibility QUESTION: What specific positions are eligible to participate in the plan? As anticipated due to the importance of the leadership responsibilities, eligibility in a non-qualified plan is most often for those in the CEO and Vice-President roles. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% President and Chief Executive Officer 87% Vice Presidents 71% Board of Directors 25% Director level 43% Division or Unit Managers Other 33% 32% N=103 28 newportgroup.com

Non-Qualified Deferred Compensation Plans Importance QUESTION: How important are each of the following for your non-qualified benefit programs? (Check one box for each row) Over half of organizations found the use of non-qualified programs to be critical or very important as a financial planning tool for the executive group in tandem with the tax efficiencies offered. Executive retention and recruiting are supported by these plans as well, according to respondents. 0% 10% 20% 30% 40% 50% 60% Executive Recruiting 8% 13% 17% 31% 31% Executive Retention 12% 11% 12% 26% 40% Not Important Financial Planning tool for Executives 4% 6% 16% 29% 46% Somewhat Important Very Important Critical More tax efficient compensation vehicle 5% 11% 17% 27% 41% Not Applicable Increase company stock ownership or defer taxes on performance units 2% 11% 18% 16% 53% N=103 29 newportgroup.com

2016/2017 Compensation, Retirement and Benefit Trends Report HEALTH AND WELFARE BENEFITS 30 newportgroup.com

Health Insurance Plan Options by FTE s QUESTION: Which of the following plans do you offer as health insurance options? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Preferred Provider Organization (PPO) Plan High Deductible Health Plan (HDHP) with HSAs or HRAs Health Maintenance Organization (HMO) Plan 74% 72% 80% 77% 69% 71% 50% 40% 55% 58% 77% 71% 28% 33% 32% 16% 31% 15% Traditional Indemnity Plan 5% 5% 2% 3% 31% 9% Do Not Offer Health Insurance 3% 5% 0% 0% 0% 3% Other 2% 3% 0% 2% 0% 6% N (number of respondents) 392 192 82 62 13 34 31 newportgroup.com

Health Insurance Plan Preference QUESTION: For you most recent open enrollment, which of the following health insurance options was selected by the largest number of employees? Similar to last year, PPOs continue to be the most popular option among employees, especially employees in organizations with over 1,500 employees. Overall, 48 percent selected PPOs during the most recent open enrollment period. High Deductible Health Plans continue to grow in popularity, and are now preferred by 30 percent of employees. 0% 10% 20% 30% 40% 50% 60% Preferred Provider Organization (PPO) Plan 48% High Deductible Health Plan with HSAs or HRAs 30% Health Maintenance Organization (HMO) Plan 19% Traditional Indemnity Plan 3% N=373 32 newportgroup.com

Health Insurance Percentage Change for 2016 QUESTION: What was the average percentage change in your health insurance plan costs for the 2016 plan year? While most employers (83%) saw an increase in health plan costs in 2016, the largest percentage of employees (28%) reported increases from 4.1 percent up to 8 percent. 0% 5% 10% 15% 20% 25% 30% Decreased 6% No Change 11% 0.1% - 4% 23% 4.1% - 8% 28% 8.1% - 12% 19% 12.1% - 16% 9% 16.1% - 20% 4% Over 20% 1% N=371 33 newportgroup.com

Health Insurance Total Premium Amount by FTE s QUESTION: For the health insurance option selected by the majority of your employees, what is your average total premium amount? What percentage do your employees contribute to the premium amount? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Average Monthly Premium Family $1,314 $1,402 $1,343 $1,096 $1,173 $1,264 Employee + One (Spouse or Child) $980 $1,053 $999 $860 $862 $849 Employee + Children $900 $943 $946 $790 $691 $847 Employee Only $520 $526 $535 $533 $394 $495 Employee Share of Premium Family 32% 32% 40% 27% 35% 28% Employee + One (Spouse or Child) 31% 31% 36% 26% 36% 27% Employee + Children 29% 29% 35% 24% 37% 25% Employee Only 20% 20% 24% 19% 31% 23% N (number of respondents) 300 138 68 52 10 26 34 newportgroup.com

Plans to Address Health Care Costs by FTE s QUESTION: What actions do you plan to take for the 2017 plan year to address health care costs? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Raise Employee Portion of Premium Payment 30% 20% 36% 46% 22% 42% Raise Employee Deductibles 17% 12% 18% 20% 33% 23% Implement Wellness Program 18% 13% 26% 15% 33% 26% Offer Consumer Driven Health Care Option 7% 6% 6% 8% 11% 6% Conduct Dependent Audit 4% 1% 3% 3% 11% 19% Discontinue Coverage to Dependents 0% 1% 0% 0% 0% 0% Offer Opt-Out Incentive 5% 4% 4% 10% 0% 6% Pursue Coverage through a Private Exchange 5% 7% 5% 7% 0% 0% Discontinue Coverage to Part-Time Employees 0% 1% 0% 0% 0% 0% Discontinue Retiree Medical 0% 0% 0% 0% 0% 0% Discontinue Coverage in State or Federal Exchange 0% 1% 0% 0% 0% 0% Institute On-Site Health Center 1% 1% 0% 0% 11% 3% No Actions Planned 51% 62% 41% 36% 78% 32% N (number of respondents) 368 178 80 59 9 31 35 newportgroup.com

Benefits by FTE s QUESTION: Which of the following benefits do you currently offer? Overall 100 or Fewer 101-250 251-750 751-1,500 1,500 or more Dental 97% 93% 100% 100% 100% 100% Life 93% 88% 96% 100% 100% 97% Long-term Disability 81% 73% 88% 92% 92% 88% Short-term Disability 73% 64% 80% 84% 85% 85% Vision 80% 72% 88% 84% 100% 88% Wellness Programs 46% 29% 51% 64% 69% 85% Long-term Care Insurance 16% 12% 11% 25% 38% 24% Retiree Medical 8% 3% 5% 11% 15% 29% On-site Health Center 8% 1% 5% 16% 23% 26% N (number of respondents) 376 179 81 61 13 34 36 newportgroup.com

For More Information: For a copy of our CRB Trends Report Executive Summary, please visit: www.newportgroup.com For a copy of our full report, or questions about Newport Group services, please contact: Rena Somersan Managing Principal Milwaukee, WI 414-236-0470 rena.somersan@newportgroup.com 37 newportgroup.com

Coming Soon! Executive Benefits: A Survey of Current Trends 38 newportgroup.com