Tax Reform: Business Income Tax Highlights Presenter’s name Presenter’s title

Small business means big business Protecting their business from the loss of a key employee is the #1 issue facing business owners1 The “quit rate” in January was 3.3M people2 19% of family business participants have not completed any planning other than writing a will – and only 36% have an exit plan.3 At any given time, 40% of businesses are wrestling with transfer of ownership and control.4 Over the next 20 years, $4.8 trillion of net worth will be transferred.4 For more than 60 years, Principal has focused on serving the needs, challenges and opportunities faced by business owners and key employees. 1 2017 Principal Business Owner Survey, conducted by Harris Interactive. 2 US Census Bureau 3 Family Firm Institute: www.ffi.org, 4 Family Firm Institute, 2009 For financial professional use only. Not for distribution to the public.

Key planning needs for business owners Succession planning Key employee retention Retirement income Legacy and estate planning At Principal, we start by breaking the BIG question down into 4 key areas: Business Organizations, Succession Strategies, Estate Planning, and Retirement Income. From there, we approach each key area as a building block for the next – one piece at a time. Within each building block of the Ag Planning Report, the information and solutions are customized to focus in on your specific conditions and goals. By tackling them “one piece at a time”, we can make steady, tangible, and coordinated progress. For financial professional use only. Not for distribution to the public.

Three primary types of changes Tax Cuts and Jobs Act Three primary types of changes Income tax rate changes - C corporations Income tax rate changes - passthrough entities Changes to executive compensation For financial professional use only. Not for distribution to the public.

Income tax rate changes C corporations

Comparison of 2017 and 2018 corporate tax provisions For financial professional use only. Not for distribution to the public.

C corporation changes Corporate AMT is repealed Impact on corporate owned life insurance policies Accumulated earnings tax For financial professional use only. Not for distribution to the public.

Income tax rate changes Passthrough entities

Comparison of 2017 and 2018 law Tax Cuts and Jobs Act For financial professional use only. Not for distribution to the public.

Qualified business income deduction   1 Pass-through entities include S corporations, partnerships, sole proprietorships, and LLCs that are taxed as any of these pass-through entity types 2 Examples include accountants, attorneys, doctors and dentists 3 Examples include manufacturing, construction and retail businesses For financial professional use only. Not for distribution to the public.

Comparison of individual federal tax rates 2017 2018 Tax rate Married filing jointly 10% $0 - $18,650 Up to $19,050 15% $18,651 - $75,900 12% $19,051 - $77,400 25% $75,901 - $153,100 22% $77,401 - $165,000 28% $153,101 - $233,350 24% $165,001 - $315,000 33% $233,351 - $416,700 32% $315,001 - $400,000 35% $416,701 - $470,700 $400,001 - $600,000 39.6% Over $470,700 37% Over $600,000 For financial professional use only. Not for distribution to the public.

Changes to executive compensation

Comparison of 2017 and 2018 law Tax Cuts and Jobs Act For financial professional use only. Not for distribution to the public.

Comparison of 2017 and 2018 law Tax Cuts and Jobs Act For financial professional use only. Not for distribution to the public.

Planning opportunities created by tax changes

Planning opportunities: For businesses Business needs haven’t changed More discretionary income Impact on retirement solutions Lower overall tax burden for company makes more funding available for executive benefits Company out-of-pocket cost is less when using double bonus design due to employee lower tax rates Impact on other business solutions Additional dollars available for business protection and succession and key person For financial professional use only. Not for distribution to the public.

Planning opportunities: For owners of passthrough entities Individual income tax provisions expire (“sunset”) after 2025 Seven years to put extra tax savings aside Use tax savings to fund vehicles now that can receive favorable income tax treatment when rates have gone back up Principal offers product features designed for retirement income savings For financial professional use only. Not for distribution to the public.

Supporting you every step of the way Business Market Administration Supporting you every step of the way Deciding on a solution Plan services keep clients coming back, and keep you free to focus on building sales We regard our business insurance solutions as complete plans – not just individual policies.  And the services you and your clients receive reflect this approach. Dedicated BMA administrator will be assigned to provide personalized service and support. Determining a solution: Working in tandem with our Advanced Solutions team (which is staffed with attorneys, CPAs, and plan design specialists), BMA can assist with case design and billing consultation. Plan implementation/new enrollments: BMA can assist with assembling appropriate submission forms based on the selected plan design. Online access: Employer-sponsors may view the following online: News & Info, Life Premium Information, Life Policy Information, Life Policy Values, Specific Policy Details (only when policies are corporate-owned) With corporate-owned variable life insurance, the employer may also request policy changes online, such as division transfers, allocation percentage changes for future premiums, etc. Insured-participants may view their respective policy information online when policies are individually-owned. And with variable life insurance, they may also request policy changes online, such as division transfers, allocation percentage changes, etc. List billing – Principal sends consolidated payment reminders covering all policies under the plan.  This enables the employer-sponsor to pay policy premiums via a single check.  Annual, semi-annual, quarterly, and monthly payment modes available. Ongoing policy administration and service – The BMA administrator is able to assist with any policy adjustment questions, service requests, illustration needs, etc.  Annual plan-level reporting – Summary Annual Reports mailed directly to employer-sponsors. Plan status and strategy review – Upon request, BMA administrator can assist producer with reviewing policy status relative to the client’s goals. View our BMA Services Flyer (BB9441) For financial professional use only. Not for distribution to the public.

Questions?

<Leave on screen long enough for people to read.> Principal National Life Insurance Company and Principal Life Insurance Company, Des Moines, Iowa 50392-0001 Insurance issued by Principal National Life Insurance Co. (except in NY) and Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-247-9988, Member SIPC, and/or independent broker/dealers. Principal National, Principal Life and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 50392. For financial professional use only. Not for distribution to the public. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group®. Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group. We are not attorneys nor practicing CPAs, and we encourage you to consult your legal and accounting professionals to determine whether any of the ideas presented here would be suitable for your company. <Leave on screen long enough for people to read.> BB12129 | 03/2018 | 448250-032018 | © 2018 Principal Financial Services, Inc.