Income Protection Restoration Plan For the Leadership Staff of ABC Corporation

Income is the foundation of a solid financial plan The Need Income is the foundation of a solid financial plan Individual Disability Income insurance is the foundation to a solid financial plan. How solid is you and your employees’ financial foundation?

How are Senior Leaders Compensated? Salary Bonus or Commissions Pension Health/employee benefits/flexible spending account Technology – computers, tablets, phones Perks – golf & health club memberships, Costco, etc.

The Need What is your executive’s earnings potential? Potential Earnings to Age 65 (with 5% annual salary increases) Annual Income $100,000 Age 35 $6,644,000 Age 40 $4,773,000 Age 45 $3,307,000 Age 50 2,158,000 Annual Income $250,000 Age 35 $16,610,000 Age 40 $11,932,000 Age 45 $8,266,000 Age 50 $5,395,000 Annual Income $500,000 Age 35 $33,219,000 Age 40 $23,864,000 Age 45 $16,533,00 Age 50 $10,789,000

The Need Disability plays no favorites. The causes of disability may surprise you! Here’s a breakdown (by percentage of claims) of some typical reasons an individual may become disabled*: * Source: Principal Life Disability Insurance claims incurred as of March 2012. The above is for illustration purposes only and is not intended as an inclusive representation of all claims.

Average length of Individual Disability claim 31.6 Average length of Individual Disability claim months¹ 52% of our claims last longer than five years ¹2012 Gen Re, U.S. Individual DI Risk Survey (Council for Disability Awareness) 7

Odds of Incurring A Disability of 90 Days or Longer Need for Individual Disability Insurance Odds of Incurring A Disability of 90 Days or Longer Average Age Number of people in group 1 2 3 4 5 6 25 58% 82% 92% 97% 99% 30 54% 79% 90% 96% 98% 35 50% 75% 88% 94% 40 45% 70% 84% 91% 95% 45 40% 64% 78% 87% 50 33% 55% 80% 86% 55 25% 43% 57% 68% The statistics are real. As these numbers show, the odds of a disability are greater than most people probably imagine, especially in a group setting. According to the Commissioner’s Individual Disability A table, at the age of 35, one person in a group has a 50% chance of incurring a disability. The more individuals in a group (or the more employees within a company), the greater likelihood someone will become disabled and cannot work. For example, if you have just 3 employees at an average age of 45, there is a 78% chance one of those employees will have an injury or illness lasting longer than 90 days before they reach the age of 65. Source: Commissioners Table on Disability (NAIC) Source: Commissioner’s Individual Disability A table

Group Long Term Disability Plans Easy to administer – one master policy covers all employees Guaranteed issue (with pre-existing condition clause) – no hassling with medical information Cost effective – usually cost is only ½ to 1% of gross covered monthly pay

Proposed Long Term Disability Plan Benefits begin after 90 days of disability Benefits are paid through Social Security Normal Retirement Age Benefits are paid for total and partial (residual) disabilities Pays 60% of W-2 + k-1 Pays up to $6,000 per month Benefits received tax free

Supplemental Income Protection Plan Sample Owner $200,000 Salary + K-1 Gross Monthly Income: $16,667 Net Monthly Income: $11,667 (Assumes 30% effective tax rate) Group Disability Benefit: $6,000 This represents 36% of your take-home pay. With the Supplemental Income Protection Plan you will be able to buy up to an additional $1,675 per month. Because you are paying the premium, this benefit will be received tax free. Between the $4,250 of ABC, Inc. provided benefit and the $1,675 of supplemental benefit you would receive $5,925 per month covering about 80% of your take home pay.

guarantees variable comp Supplemental Income Protection How it Works Enhancing a portion of the high earning employees LTD benefit can reduce volatility in the Group LTD plan given you are shifting a portion of the benefit into a fixed pooled rate individual platform. Executives Senior Managers Individual LTD & Group LTD Protects Higher % plus guarantees variable comp Carve Out Group Managers Employees Group LTD Provides a Foundation but can only protect so much Transfer of Risk: Individual experience does not impact group rating Rate Stability: Individual rates are fixed To Age 65 and cannot increase Value Added : Additional features generates executive benefit perk

Individual Disability Benefits Policy Pays in Three Ways: Total disability in your occupation Residual (partial) benefits after a 20% loss of income Catastrophic Benefits up to an additional $8,000 per month (age 60 and younger) Guaranteed coverage increases can be included Guaranteed benefits and premium through age 65 Guaranteed 20% unisex discount included Policy and discounts are portable

Supplemental Income Protection Plan Sample Owner $200,000 Salary + K-1 Gross Monthly Income: $16,667 Net Monthly Income: $11,667 (Assumes 30% effective tax rate) Group Disability Benefit: $6,000 Supplemental Individual Benefit $4,000 This represents 86% of your take-home pay. . With the Supplemental Income Protection Plan you will be able to buy up to an additional $1,675 per month. Because you are paying the premium, this benefit will be received tax free. Between the $4,250 of ABC, Inc. provided benefit and the $1,675 of supplemental benefit you would receive $5,925 per month covering about 80% of your take home pay.

Percent Income Covered Benefit/Monthly Premium Summary 90 Day Wait/to age 67 benefit period with residual and catastrophic disability benefits Percent Income Covered Individual Only Individual + LTD Exec 1 51% 60% Exec 2 57% Exec 3 Monthly Premium $1,482.72 $1,045.26 Premiums reflect IDI non-smoker rates; cigarettes/chewing/dipping +25%

Underwriting Made Simple Medical Underwriting: Age 65 and higher Telephone Interview confirming health history Blood profile, urinalysis, paramedical exam 2016 Personal 1040 + business returns (1120S) Age 64 and younger and less than $6,000 per month benefit Telephone interview confirming health history

Enrollment Timeline

Financial Strength and Integrity Principal Life Insurance Company: Over 130 years of experience with a comprehensive product portfolio High ratings from independent rating firms1 Over 22 million customers 2016 One of Worlds Most Ethical companies – Ethisphere Magazine Member of FORTUNE 500® and Standard and Poors 500® 1 A high rating by a particular firm does not constitute an endorsement of the rated insurer by the ratings firm.