June 26, 2008

Executive Benefit Trends

MullinTBG520 Lake Cook Road, Suite 520Deerfield, IL 60015www.mullintbg.com

© 2008 MullinTBG. All rights reserved.

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Important InformationThe materials in this document have been prepared by MullinTBG solely for the use of PLANSPONSOR.

The materials are designed to convey accurate and authoritative information concerning the subject matter covered and should not be construed as tax or legal advice. Likewise, information supplied by life insurance companies and other sources is believed to be accurate. However, no information is guaranteed unless labeled as such. Information is provided with the understanding that MullinTBG does not engage in the practice of law, or give legal, tax, accounting or asset allocation advice. For advice in these areas, including the attached information and its application to specific transactions, please consult your appropriate advisors.

Any hypothetical investment performance data contained within this document are included for illustrative and informational purposes only, not as a representation of past or future results.  Actual results will vary from those illustrated.  In particular, it should be understood that policy performance will be affected either positively or negatively, by changes in market conditions, including interest rates and equity valuations, by premium payment amounts and frequencies, and by policy charges.

The attached materials contain intellectual property, are proprietary and may not be shared with any person outside of PLANSPONSOR without the specific

written approval of MullinTBG. Beyond this limited authorization, all rights are reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise).

MullinTBG, through its affiliate MullinTBG Insurance Agency Services, LLC, acts as agent for a number of life insurance companies for the sale of life insurance, annuities and disability insurance.

MullinTBG is a member of the M Financial Group, a financial services producer group of independently owned and managed Member Firms. M Financial provides product design and marketing assistance, but does not control the activities of its Member Firms, which are not required to offer financial service products designed or promoted by M Financial. M Financial does not issue insurance policies or financial service products to purchasers.

M Financial, its subsidiaries and its Member firms, may receive compensation from unaffiliated direct-writing insurance carriers. M Life Insurance Company, a subsidiary of

M Financial, may reinsure a portion of the risk on policies underwritten by such affiliated carriers.

Member Firms and their affiliated persons are producers and/or stockholders in M Financial and may receive incentive compensation and/or equity returns on the potential profitability of business reinsurance by M Life in exchange for sharing in the risk of loss.

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James M. ClaryPresidentMullinTBG

Registered Representative(s offering securities through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA and SIPC. MullinTBG and MullinTBG Insurance Agency Services, LLC are owned and operated independently from M Holdings Securities, Inc.

Office of Supervisory Jurisdiction: 2029 Century Park East, 37th Floor, Los Angeles, California 90067, Tel: 310.203.8770

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409A – History Enacted in October 2004 to impose significant restrictions

on deferred compensation (broadly defined) Intended to curb more aggressive plan features

(particularly those that pushed constructive receipt constraints) against which IRS had been unsuccessful in litigating

Failure to comply results in immediate income on deferrals, a 20% excise tax and other penalties

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409A – A High-Level Look Deferral elections must be made in the calendar year

before services are performed Distribution events limited

– Separation of service– Fixed schedule– Change in control– Death– Disability– Unforeseeable emergency

Restrictions on re-deferrals and payment accelerations

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409A – Impact on Executive Benefit Arena MullinTBG and PLANSPONSOR conducted second annual

executive benefit survey in 2007 Over 350 responses from broad range of American

corporate landscape– 70% publicly traded– 93% tax payers– 68% with annual revenue/sales in excess of $1 billion

Survey highlights developing trends and emerging best practices post-409A– What is prevalent?– What is changing?– How effectively are plans meeting company and

executive needs?

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Qualified and Nonqualified Trends Majority of companies reported no changes to most of

their qualified plans Prevalence of defined benefit pensions continued to

decline– Over 28% of respondents stated that they had reduced

or eliminated DBs over the past 5 years 409A has had little impact on the willingness of employers

to offer nonqualified deferred compensation plans (NQDCP)– Over 90% of companies offer NQDCPs

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NQDCP Landscape Two main rationales given for offering NQDCPs

– Provide executives with retirement planning opportunities

– Provide HR with a recruiting/retention tool 80% feel NQDCP is effective in achieving objectives Those not satisfied cite:

– Unattractive plan features– Undue complexity– Lack of rabbi trust

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NQDCP Participation Confidence in company performance is most influential

factor in choosing whether or not to participate Education/communication and general plan flexibility also

attract participants Overall, over half of eligible executives choose to

participate Plans with company match see increased participation –

61% vs 41% Where informal funding is in place, average participation

increases by 27% (from 44% to 56%)

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NQDCP Design Options Wide variety in plan features among NQDCPs, especially

with regard to investment options and valuation frequency– Almost 79% offer between 1 and 20 investment options– Lifestyle/lifecycle funds continue to grow in popularity

(offered in one out of 5 plans)– Daily valuation is by far the most-offered mode (79%)

Over 90% of companies offer opportunities to defer base salary and bonus, with other deferral sources being less prevalent

Nearly half of all companies provide some type of company match– 57% of those make up the match “lost” in the 401(k)

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NQDCP Funding and Security Informal funding continues to be utilized by more than

two-thirds of respondents– Offset growing plan liabilities– Create an asset-to-liability match to hedge the P&L– Provide some measure of participant security

Among companies with NQDCP liabilities in the $20 million to $100 million range, 80% informally fund their plans

Of those that fund, 82% fund the pre-tax liability Mutual funds and corporate owned life insurance (COLI)

are employed by public companies in equal measure Rabbi trusts maintained their position as the security

vehicle of choice

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NQDCP Record Keeping 69% of companies use a third party for NQDCP record

keeping– Access to enhanced online tools– On-demand benefit statements– Paperless, on-line enrollment– Call centers

Statement accuracy is ranked as most important when assessing record keeper performance

Experience, expertise and capabilities are given more consideration in decision-making process than price

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Financial Planning and Advice Companies are feeling the pressure of the “silver tsunami”

as baby boomer executives approach and enter retirement General sense of unease about answering participants’

questions on topics such as fund allocation and estate planning– Confidence level at providing guidance at 5 or lower on

10-point scale Many large and publicly traded companies offer financial

planning benefits provided by outside advisers– Most do so at no cost to the executives

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Other Benefits Group LTD and group life insurance are consistently

offered About 50% of companies offer voluntary long-term care

coverage Executive life insurance is offered by about 50% of

companies, most often for pre-retirement coverage only Supplemental disability insurance is offered by over 40%

of companies, split between voluntary and company-paid arrangements

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Summary NQDCPs remain an increasingly popular tool

– Attracting and retaining key executives– Providing additional retirement savings vehicle to compensate

for loss of DB plan Irrespective of 409A, most companies continue to offer NQDCPs Executives appear to be growing more concerned with all aspects

of benefit security Majority of companies informally fund and use mutual funds and

COLI Company match and clear communication/education are key

drivers of plan participation and satisfaction Most companies rely on experienced third-party vendors for

specialized knowledge required for NQDCP recordkeeping– Vendors more highly regarded when delivering cost-effective,

exceptional service in plan deign, consulting, customer care and record keeping