1. Financial Interworkings of Fiduciary Plans Cary Meiners St. Paul Travelers Terrence M. Deneen Pension Benefit Guaranty Corporation Barbara Gubitose Acordia Rod Rodriguez, Esq. Day, Berry & Howard LLP Marc Siegel Center for Financial Research & Analysis

2. The Pension Landscape A call for transparency and honesty Unfunded pension liabilities for the S&P 500 approximates over $200 billion 60% of the S&P 500 still offer traditional pensions Claims on the PBGC have soared Healthcare costs/other post-retirement benefits are perhaps a greater, and largely unfunded, problem Municipalities and the public sector facing the same concerns - now approaching $1 trillion in underfunding

3. Accounting For Change One of FASB’s goals is to better match pension plan assets to pension obligations S&P 500 companies totaled a $264 billion discrepancy between reported pension B/S assets and pension underfunding The FASB project will include other postretirement employee benefits (OPEB) Transparency is needed on the balance sheet, income statement and cash flows

4. Current Congressional Proposals Congress (via ERISA) establishes all rules for pension funding House and Senate bills will force change  May actually reduce funding by $160 billion in the next three years Will likely create “zones” of underfunding, triggering acceleration of funding by employers Likely to get a new law in 2006 Will underfunding affects sources and frequency of claims?

5. Fiduciary Duties “Exclusive Purpose” and the Duty of Loyalty “Prudent Person Standard” and the Duty of Care Role of Diversification Plan Guidelines

6. Fiduciary Liability Scope of Damages  Joint & Several Liability  Plan Remedies  Limitations Limitation of Duties:  Appointing Fiduciaries  Candidate Evaluation  Monitoring Performance

7. Fiduciary Best Practices Fiduciary Best Practices: Regular Meetings with Minutes Plan Review and Education/Training Prudent Processes - Documentation Written Investment Policy Compliance Hygiene/Audits Fiduciary Liability Insurance Communication

8. Hedge Funds: The Answer or the Problem? For some, underfunding means taking more risk, not laying out more cash Pension plans currently provide 40% of the $600 billion in buyout funds A repeat of derivatives or is this different? Are pension managers equipped to handle these complex investments? What are the fiduciary implications and responsibilities?

9. Hedge Funds: The Answer or the Problem? Investment in private equity/hedge funds runs deep for many:  GM: 10% of pension assets invested in private equity  Delta: 13%  Eastman Kodak: 20%  The State of Pennsylvania: 23%  Weyerhaeuser: 39%

10. Are Underwriters Up To the Task? The complexity of pension accounting Reliance on outdated information Less insured interaction than on D&O Private company/nonprofit challenges Will insured meetings have to change? Underwriting in the future - what to look for

11. Resource Acknowledgement Information has been obtained from the following sources:  NY Times Online  BusinessWeek Online  FASB Website  Forbes Magazine