1. Principal® is not responsible for the use of or changes to this resource. Please consult your legal and compliance areas to confirm that your use of this resource is appropriate, that it contains the appropriate disclosures for your business, that it has been reviewed by any necessary third parties (e.g., FINRA or other regulators) and is appropriate for the intended use and audience.

2. Instructions ** Delete this slide before presenting to participants **
Customize the slides to include the options you want to present
Slide #5: Edit the match or remove bullet if not applicable
Slide #15: Plan administrative fee changes
Select one of the following slides; edit percentage to reflect the plan’s specific fees:
Slide #16: Zero revenue sharing investment options
Slide #17: Zero revenue sharing through fee credits
Slide #18: Revenue sharing with fee adjustments
Include “Important information” slide 22
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3. Behind the scenes of your organization’s 401(k)
Understanding retirement plan fees and upcoming changes
[PRESENTER: You’ll need to modify this PPT if you are discussing a 403(b) plan. Also, anything highlighted in BOLD is OPTIONAL or requires you to edit according to your client’s plan.)
Hello and welcome.
Today, we’re here to talk about your company’s 401(k) plan. Specifically, we’re going to go behind the scenes so you can better understand how it works and, more importantly, why you want it working hard for you.
Presenter
Title 3

4. We’ll cover Your retirement account - Benefits of a retirement plan
- How it works … and why you want it working hard
The plan is not changing, but the way fees are paid for is
- What’s changing
- What to look for and where
Here’s what we’ll cover today …
Your retirement account
Benefits of a retirement plan
How it works … and why you want it working hard for you (we’ll talk about things you may or may not know about your company’s retirement plan as well as why you likely have a vested interest in the plan)
The plan is not changing, but the way fees are paid for is
What’s changing
What to look for and where
Questions
Questions
For illustrative purposes only.

5. The plan offers … Long-term savings and growth potential
Reduced taxable income (through pre-tax contributions)
Matched contributions (X% up to X%)
Potential for compound earnings
By offering you access to a retirement plan, your employer allows you to:
Realize long-term savings and growth potential across a variety of the plan’s investment options
Reduce your taxable income, since your pre-tax contributions lower your taxable income
Benefit from:
Matched contributions (i.e., X% up to X%) is essentially FREE money! (PRESENTER: This is an OPTIONAL bullet – remove from slide if not applicable.)
Potential for compound earnings puts your earnings back into your account so you can have earnings on your original contribution and earnings
Dollar cost averaging allows you to invest over the highs and lows of various market cycles
So, would you agree that you have access to a truly great retirement savings vehicle? I think so, which is why I hope you’re taking advantage of it.
Let’s dig in a little deeper now and talk about how it really works.
Dollar cost averaging1
1 Dollar cost averaging involves continuous investing. Investors need to consider their ability and willingness to continue investing through periods of low price levels. This does not assure a profit nor protect against loss in declining markets.
For illustrative purposes only.

6. How the plan works … and why you want it working hard for you
You decide if and how much to contribute
You select the investment allocation
Your contributions go into the plan automatically
Your employer oversees the plan
Your employer contributes to the plan (optional bullet – remove if not applicable)
Your retirement savings have the potential to grow tax-free
Generally speaking, here’s how many of you might describe how your organization’s retirement plan works …
You decide if and how much to contribute to the plan (PRESENTER: If your organization’s plan is using automatic enrollment, you might revise this to say, “You are automatically enrolled in the plan, but you can change your deferral percentage or opt out of the plan.”)
You select how your funds are allocated (i.e., which investment options your contributions will go toward)
Your contributions automatically go into the plan on your behalf (through a payroll deduction)
Your employer oversees the plan
Your employer makes contributions to the plan (OPTIONAL bullet – remove from slide if not applicable)
Your retirement savings has the potential to grow tax-free
Is that about right? But, you may or may not know there’s a lot more involved with “overseeing the plan” (bullet #4). In fact, your company:
They’ve hired a “service provider” for the administrative services and to provide access to investment options
And, your payroll deductions are sent directly to that service provider
Of course, to cover the costs of running the plan, the service provider has to charge certain fees. You should understand these fees so you can see how they can impact your retirement savings.
For illustrative purposes only.

7. How the plan works …
and why you want it working hard for you
You’re sharing some of the costs for the plan (and likely have been)
Yes, it’s true. You share some of the cost to access and use your 401(k) account.
Just like there are fees associated with investing on your own, there are expenses related to a 401(k) plan services and investment options.
In fact, the fees to operate a retirement plan and invest through the plan have always existed, and information about the fees is available. Remember, fees are always disclosed so you have the information you need to make informed decisions about your retirement account.
But it’s important to keep in mind that, in many cases, saving through a retirement plan provides access to investment options at a more cost effective rate than you could purchase on your own.
(PRESENTER: It may make sense to offer an analogy here (i.e., “Think about other services that you receive in your daily life, like electricity or data for your phone. There is a cost for these services, just like there are costs for your 401(k) account.))
(PRESENTER: You may need to remove slide text “(and likely have been)” if applicable.
For illustrative purposes only.

8. How the plan works … and why you want it working hard for you
Fees associated with your retirement account
Investment management fees
Plan administrative fees
Participant transaction fees
So, let’s talk about the types of fees associated with the retirement plan. They’re meant to cover the services required to provide you access to your retirement account, so let’s review them.
Investment management fees
Costs related to offering and managing the various investment options made available under your employer’s plan
Who pays? Paid by employees
And, I’ll dig into this more in a minute …
Plan administrative fees
Costs related to day-to-day services from third-parties, such as recordkeepers, third party administrators (TPAs) and/or financial advisors. These services can include:
Recordkeeping (e.g., coordinating and tracking all contributions to the plan)
Participant services, such as website, mobile app, call center and communications
Services related to complying with rules and regulations associated with the plan (compliance services)
Who pays? Paid by employer and/or employee (PRESENTER: Modify comments based on the plan.)
Participant transaction fees
Costs related to loans – if offered by the plan
Costs related to distributions
Who pays? Employees (only those making these type of transactions)
For illustrative purposes only.

9. How the plan works … and why you want it working hard for you
How retirement account fees are typically collected
Each investment option you select has a fee attached to it
Fees vary from one investment option to the next
Fees are deducted from your account and returns show “net of these fees”
Your next question might be … how are these fees typically collected?
Each investment option you select has a fee attached to it (generally a small percentage of the dollars you invest), which is determined by the investment manager
Fees cover the cost to manage the investment option, including investment management, operations and legal expenses
This expense is automatically taken from your account and is reflected in the investment option’s overall return. A portion of it may be used toward the plan’s administrative fees we just discussed. This is often referred to as revenue sharing, which we’ll discuss on the next slide.
Fees vary from one investment option to the next
Which means you may be paying more or less of the plan’s administrative expenses depending on the investment options you select
Fees (a.k.a. expense ratio) are deducted from your account and returns show “net of these fees”
For illustrative purposes only.

10. Revenue sharing What’s that? What is revenue sharing?
It can be part of your elected investment option’s expense
Automatically taken from your account
Helps pay for plan administrative fees
Let’s pause to ensure everyone understands the term, revenue sharing.
Revenue sharing can be part of your investment options expense. It’s automatically taken from your account and reflected in the investment options overall return. Revenue sharing allows a company to pay all or a portion of the plan fees implicitly through payments received from the plan’s investment options.
Investment manager expense +
Revenue sharing1
1 If applicable. Some investment options include revenue sharing and some do not.
Total investment option expense
For illustrative purposes only.

11. Revenue sharing — most common approach%
1.00
0.80
0.60
0.40
0.20
Comparison of plan administrative fees paid by participants
Revenue sharing amounts vary, meaning some participants may pay different proportions of the plan’s administrative fees.
Let’s look at an example. As we just discussed, you contribute to the plan’s administrative fees through the revenue sharing, if applicable, of the investments you select. This is the most common way these fees are paid within retirement plans today.1
But as you can see with this illustration, the amount of revenue sharing can vary from one investment option to the next — meaning participants may pay different proportions of the plan’s fees.
While the investment’s expense is always disclosed to you, your organization’s plan, like many other plans, are making changes so that you contribute towards plan administrative fees in a more equitable manner, regardless of the investment options you choose.
1 Deloitte Annual Defined Contribution Benchmarking Survey, August 2015.
John
Mary
James
Ashley
Robert
Investment management expense
Revenue sharing contributed to plan administrative fees
For illustrative purposes only.

12. Participants pay different proportions of the plan fees
Revenue sharing
Comparison of plan administrative fees paid by participants (example)
Account balance
Investment option selected
Revenue sharing from investment option
Revenue sharing reflected as a dollar amount
John
$50,000
Investment A
0.30%
$150.00
Mary
Investment B
0.49%
$245.00
James
Investment C
0.00%
$0.00
Ashley
Investment D
0.21%
$105.00
Robert
Investment E
0.35%
$175.00
Here’s an example of how revenue sharing typically plays out. Notice the column on the far right, which shows the variances in dollar cost impact for each participant.
Participants pay different proportions of the plan fees
For illustrative purposes only.

13. Changes to plan fees …
and how plan administrative fees will be collected %
1.00
0.80
0.60
0.40
0.20
Comparison of plan administrative fees paid by participants
Going forward, everyone will share an equal percentage/cost of the plan’s administrative fees regardless of their investment options.
With that in mind, we’re making some changes to the company’s 401(k) plan. Don’t worry, the 401(k) plan is not changing, just the way fees – the fees you pay – towards plan administrative fees are collected. (PRESENTER: OPTIONAL STATEMENT… And that fee will also be lower.)
First, let’s talk about why we’re making changes. It’s simple. You all have access to the same investment options and services, so it makes sense that everyone pays the same amount (at least for plan administrative services). Keep in mind, you’ll still have expenses associated with each investment option and these will vary based on the type of investment. And, participant transaction fees will not be affected by this change.
Going forward, everyone will share an equal percentage/cost of the plan’s administrative expenses regardless of their chosen investment options
Let’s look at an example.
John
Mary
James
Ashley
Robert
Investment management expense
% contributed to plan administrative fees
For illustrative purposes only.

14. All participants pay the same
Changes to plan administrative fees …
All participants pay the same
Account balance
Investment option selected
% contributed to plan administrative fees
% reflected as a dollar amount
John
$50,000
Investment A
0.30%
$150.00
Mary
Investment B
James
Investment C
Ashley
Investment D
Robert
Investment E
Using the same example we just discussed, here’s how it will look future state. Notice the column on the far right. Now there are no variances for each participant. Everyone pays the same.
We’ve been discussing how this works conceptually. Now let’s take a look at the specific changes you’ll see.
All participants pay the same
For illustrative purposes only.

15. What changes can I expect to see?
OPTIONAL SLIDE: CUSTOMIZABLE SLIDE FOR YOU TO USE IF YOU CHOOSE
What changes can I expect to see?
Current plan administrative fees1 (paid through revenue sharing; can vary)
Updated plan administrative fees2 (everyone pays the same)
Effective
date
.xx% - .xx%
.xx%
xx/xx/xxxx
Today, the revenue sharing amounts included in the investment options of the plan can range from .xx% to .xx%. Starting xx/xx/xx for the current plan year, this will be levelized and everyone will contribute .xx% of their account balance towards the plan’s administrative fees.
Let’s take a look at how this may look.
(PRESENTER: SELECT YOUR NEXT SLIDE BASED ON THE OPTION YOU SELECTED & REMOVE SLIDES YOU DON’T NEED.)
Zero revenue sharing investment options (Slide #16)
Zero revenue sharing through fee credits (Slide #17)
Revenue sharing with fee adjustments (Slide #18)
1 Fees are an estimate based on how funds are allocated among the plan’s investment options.
2 Plan administrative fees can be subject to change annually.
For illustrative purposes only.

16. Changes to plan fees … Result
OPTIONAL SLIDE: USE THIS SLIDE ONLY IF YOU’VE SELECTED ZERO REVENUE SHARING INVESTMENT OPTIONS
Changes to plan fees …
and how plan administrative fees will be collected
Revenue sharing from selected investment options
John:
Mary:
James: 0%
John:
Mary:
James:
Same admin fee for all participants
0.30%
[PRESENTER: This is an optional slide. Use only if you’ve selected zero revenue sharing investment options. Edit percentages to reflect your plan’s specific fees.]
Here’s a look at zero revenue sharing investment options …
So, how does this work? Here, with this approach, you can see that each investment option produces the same rate of revenue sharing (zero). The result … the total investment expense of most investment options will be lower. Moreover, plan administrative fees are charged separately and all of you (participants) pay the same proportion of plan administrative fees.
The total investment expense of most investment options will be lower; plan admin fees charged separately; all participants pay the same proportion
Result
For illustrative purposes only.

17. Changes to plan fees … Result
OPTIONAL SLIDE: USE THIS SLIDE ONLY IF YOU’VE SELECTED ZERO REVENUE SHARING THROUGH FEE CREDITS
Changes to plan fees …
and how plan administrative fees will be collected
Revenue sharing from selected investment options
Revenue sharing credited back to participant accounts
Same admin fee for all participants
John:
Mary:
James:
0.30%
0.49% 0%
-0.30%
-0.49% 0%
John:
Mary:
James:
0.30%
(no
change)
[PRESENTER: This is an optional slide. Use only if you’ve selected zero revenue sharing through fee credits option. Edit percentages to reflect your plan’s specific fees.]
Here’s a look at zero revenue sharing through fee credits (or credit all) …
Here, any revenue sharing within an investment option’s expense is credited back to your account (the participant). Revenue sharing is not used to cover plan expenses. And, plan administrative fees are charged separately and all of you (participants) pay the same proportion of plan administrative costs.
So, in this example, the investment options John selected produced 30 bps of revenue sharing so he receives 30 bps back. Mary receives her 49 bps back, and James does not see a credit to his account because the investment options he selected did not include any revenue sharing. Each participant is then charged separately the same amount to cover the administrative fees for the retirement plan.
In reality, here’s what’s happening. All revenue sharing is credited back to the participants, then the same administrative fee is being charged to each participant.
Plan admin fees charged separately; all participants pay the same proportion
Result
For illustrative purposes only.

18. Changes to plan fees … Result
OPTIONAL SLIDE: USE THIS SLIDE ONLY IF YOU’VE SELECTED REVENUE SHARING WITH FEE ADJUSTMENTS
Changes to plan fees …
and how plan administrative fees will be collected
Revenue sharing from selected investment options
Positive or negative fee adjustment applied
Same admin fee for all participants
John:
Mary:
James:
0.30%
0.49% 0% 0%
-0.19%
+0.30%
(no
change)
John:
Mary:
James:
0.30%
[PRESENTER: This is an optional slide. Use only if you’ve selected revenue sharing with fee adjustments option. Edit percentages to reflect your plan’s specific fees – ensure you double-check your math to ensure accuracy.]
Here’s a look at revenue sharing with fee adjustments (or debits and credits).
This approach allows the company to offset plan expenses through revenue sharing, but still allocate plan administrative fees equally to all of you (participants).
Fees are allocated equally among all of you (participants) by applying a positive or negative fee adjustment to the revenue sharing portion of each investment option’s expense so that everyone pays the same toward plan administrative expenses. This fee adjustment can also be referred to as a debit or a credit to the participant’s account.
In this example, there’s a true-up that occurs so that all participants are paying an equal revenue sharing amount of 30 bps for plan administrative services regardless of the investment options they’ve chosen to invest in. If you look at the first participant, John, he’s selected investment options that already provide 30 bps of revenue sharing. No adjustment is needed for him. James, however, elects different options that don’t have any revenue sharing, so he receives a debit of 30 bps to bring him up to 30 bps. The opposite is true for Mary. She’s paying 49 bps of revenue sharing through the investment options she selected, so she will see a credit of 19 bps.
So again, putting this in a real life scenario. As a plan participant, you will see either charges or credits on your statement. Every statement will look different depending on the investments you select.
Positive or negative adjustments applied; all participants pay the same proportion
Result
For illustrative purposes only.

19. Service provider website
Where to find fee information
So, where can you find fee-related information or see it?
Fee information is included on your annual notice from your employer, on your electronic or paper plan statement. You can also find it on the website, under your personal login.
[PRESENTER: If appropriate, pull up your provider website to show participants where they can find these fees and what they will look like.]
Annual notice
Plan statement
Service provider website 19
For illustrative purposes only.

20. Questions?
Now with the time we have left, let’s open it up for questions. 20

21. Thank you 21

22. Important information
Principal® and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
The subject matter in this communication is provided with the understanding that Principal® is not rendering legal, accounting or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.
Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, Iowa
© 2017 Principal Financial Services, Inc.
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