Investment Outsourcing

Plan Sponsor Fiduciary Risk is Significant Regulator Penalties & Litigation Settlements Regulatory Action by the Numbers ERISA Settlements Can Involve Significant Dollars2 Fee Settlements Are Especially Costly3 $823.2 million1 The amount reimbursed to benefit plans and participants based on DOL investigations in 2014 3,9281 The number of civil investigations the DOL closed in 2014 65%1 The percentage of those investigations resulting in monetary compensation or other corrective action 37%4 Of retirement committee members identify their roles as non-fiduciaries $140 Median Settlement: $15M DESIGN NOTE: There should actually be one additional diamond on the Fee Settlements chart at the 14 year and $140 mark. Can we modify but keep the chart to a reasonable size? Sources: 1www.plansponsor.com/dol-explains-drop-in-2014-collections-number/, 2015 2Annual Workplace Class Action Litigation Report: 2015 Edition, Seyfarth Shaw LLP, 2015 3Stuck in the Mud or Road to Success? DC Plans and Fee Lawsuits, Callan, 2015 4Allicance Bernstein, 2015

Fulfilling Duties May Require Significant Time Commitments1 SCALE Lockton has the resources to conduct this process for nearly 1,000 clients On-going Monitoring 8 Hours Individual investment product evaluations to identify underperformers, estimate likelihood of recurrence and research alternatives if replacement is needed Market Assessment 20 Hours Understanding the economic drivers to evaluate past performance and set future expectations 78 Hours of Work Every 3 Months Manager Interviews 34 Hours In depth discussion with individual money managers to gauge value added strategies driving outperformance or failed bets responsible for underperformance Product Sleeve Review 16 Hours Reviewing asset classes (size, value or growth orientation, equity or fixed income, international or domestic, etc.) to establish norms for individual product evaluation 1Source: Lockton Retirement Services, based on an assumed 16-fund option plan with additional Target Date options.

Four Steps to Building Fiduciary Confidence 1. 3. Establish an Investment Policy Document Committee Decisions Objectives Standards Decision-making process Additions Replacements Rationale 2. Monitor Using Defined Institutional Processes 4. Get Help from a Partner DESIGN NOTE: Please feel free to choose alternative iconography. Whatever is chosen, please be sure that the imagery is consistent and brand compliant coloring Data 40 quarters of rolling returns On-going meetings with managers & trading teams Prudent expert Co-fiduciary Analysis Modern portfolio statistics Quality Manager consistency and strength

Lockton Partners With Clients as an Investment Fiduciary Investment selection and oversight services ranging from: Investment Advice “3(21) Fiduciary” Outsourced Investment Management “3(38) Fiduciary” UNDERSTANDING THE DIFFERENCE: Who makes decisions? Plan Sponsor advised by Lockton Experts Lockton With a Team of Experts What can our investment menu include? Virtually any design Pre-designed menu Includes Target date funds as QDIA Stable Value Index funds Optional active core choices What vehicles can we use? Any Vehicle Mutual funds, separate accounts, etc. What recordkeepers can we use? Any Recordkeeper Decision criteria considers administration price impact Who manages fund changes? Plan sponsor advised by Lockton Professional expertise Client specific criteria Systematic decision- making Documented rationale Note: Plan sponsors retain the on-going duty of monitoring their 3(21) or 3(38) fiduciaries.

Institutional Process Leads to Objective Decision-making Reviewing 40 rolling quarters reveals whether the managers consistently outperform: Benchmarks Peer Groups Modern Portfolio Statistics (alpha, beta, R2) measure: Recent Performance Risk Risk Adjusted Performance Style Consistency Quantitative QUALITATIVE Relationship with 80+ firms enable local and national conversations with investment firms about: Products Performance Personnel Perspective on the market Recommendations Fund Options Documented Rationale

Powerful Tools Analyze Options and Track Decisions Results: Over a 5-year period, of LockSMART recommendations remain above median (vs. industry average of 23%1) 70% Lockton-advised plans were audited nearly times per year over the last 5 years2 30 findings 1 ”Industry average” defined as top quartile managers in 2010 who remained above median in 2015 2 Fiduciary Review process established in 2010