DEFINED BENEFIT EXIT STRATEGIES Your defined benefit (DB) pension plan is frozen. Now what? Effective DB exit strategy requires more than simply terminating the plan—it involves thorough strategic planning, disciplined execution and careful monitoring. To achieve the most favorable outcome, sponsors must: Develop a distribution strategy; Understand terminal funding costs; Establish a target termination date; Design a glide path to de-risk as the termination horizon shortens; and Monitor terminal funding levels to seize opportunities when presented by the financial markets. www.lockton.com Securities offered through Lockton Financial Advisors, LLC a registered broker-dealer and member FINRA, SIPC. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569 ABC Company Retirement Plan March 31, 20XX Plan Termination Readiness Report Snapshot of the Past Quarter Assets $ 46,750,000 Contributions 2,500,000 Disbursements (500,000) Earnings 4,250,000 Assets (EOQ) $ 53,000,000 Liabilities (BOQ) $ 55,000,000 Disbursements (500,000) Plan Aging 550,000 (Gains)/Losses 750,000 Liabilities (EOQ) $ 55,800,000 BOQ = Beginning of Quarter EOQ = End of Quarter Plan Termination Funded Status 100% 90% 80% 70% 60% 3/31320xx 6/30/20xx 9/30/20xx 12/31/20xx 3/31/20xx March 31, 20xx 60% 30% 10% Bonds Cash Equities Total Plan Assets: $53,000,000 March 31, 20xx 50% 20% 30% Defined In-Payment Active Total Plan Termination Liabilities: $55,800,000 Change of Position for Termination Deficit/(Surplus) ($ Millions) 12/31/20xx 3/31/20xx Liabilities $8.25 $2.80 Contributions Earnings/ Distributions Quarterly Update Group annuity rates remained fairly level over the last quarter. Net investment return for the quarter was 1.4% (not annualized). Expected time to reach plan termination sufficiency 5 Years and 6 Months Joe Smith, Vice President & Consulting Actuary, 860.534.xxxx These charts are shown for illustrative purposes only. For Institutional Plan Sponsor Use Only. Not to be distributed to plan participants or the general public. January / Plan Year Exit Planning Freeze Implementation Administrative Outsourcing Managing & Monitoring Termination Horizon Plan Termination INITIATE MANAGE TERMINATE CUSTOMIZED ANALYSIS & STRATEGY A thorough evaluation of your plan is a critical first step. Leveraging extensive knowledge of risk-transfer solutions and powerful monitoring tools, our consultants can provide all the key information needed to understand your distribution options and map out the distribution phases, including: Annuity purchases Lump-sum payouts Establish and monitor your plan termination horizon based on your distribution strategy Implement and manage a dynamic investment policy statement that enables your plan to respond rapidly to market changes within a strategic policy framework The path to plan termination is more certain when it follows a systematic approach. That’s why our DB Exit Planning Roadmap includes activities and processes that eliminate the ineffectual wait-and-see policy that many plan sponsors adopt and put you in control of your DB Exit Strategy from beginning to end. THE DB EXIT PLANNING ROADMAP THE RIGHT OUTCOME Your participants have a critical decision to make: what will they do with their benefit? We can help you give them the tools to make wise decisions. Lockton can also help your organization enhance your defined contribution plan so that it is a highly attractive alternative or supplement to the current DB program. Auto-enrollment, auto-increase capabilities, and different matching strategies can build participation and deferral rates increasing the likelihood of a secure retirement for your participants.