Nonqualified Deferred Compensation Plan

The Executive Nonqualified “Excess” PlanSM

What we’ll cover today…

Why has your employer invited you to participate in the plan?

What is a nonqualified deferred compensation plan?

Decisions you’ll need to make &

information to help you make them.

How can you use the plan to meet retirement & other savings goals?

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For Financial Professional Use Only – Not for Distribution to the Public

Why have you been invited to participate in the plan?

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For Financial Professional Use Only – Not for Distribution to the Public

Your employer values your contributions

Only select employees eligible to participate

Key employee benefit to help meet financial goals

You are being recognized….

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The retirement gap

Your retirement

savings gap could be between

40% - 60% of your needs

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For Financial Professional Use Only – Not for Distribution to the Public

All other employees

3Q 2011

All other employees

3Q 2010

All other employees

3Q 2009

Key employees

3Q 2011

Key employees

3Q 2010

Key employees

3Q 2009

Being able to enjoy the same quality of life

that I live now35% 45% 41% 52% 48% 54%

Rising cost of inflation reducing

purchasing power 28% 30% 30% 38% 28% 32%

Different retirement concerns

Source: The Principal Well Being Index, conducted by Harris Interactive, July/August 2011 results of 1,150 small and medium-sized employees and 301 highly compensated employees

Question: “In thinking ahead to your financial well-being in retirement, which of the following keeps you awake at night?”

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For Financial Professional Use Only – Not for Distribution to the Public

What is a nonqualified deferred compensation plan?

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Pre-tax deferral of compensation

Tax-deferred earnings growth

Personalized investment strategy

Contributions in excess of qualified plan limits

Flexible contribution & distribution options

Accounts for retirement & other needs

A nonqualified plan offers…

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Similarities Differences• Pre-tax contributions

• Earnings accumulate tax-deferred

• Multiple investment options*

• Distribution options set by plan

• Elections continue unless modified*

• Not subject to 401(k) plan deferral & compensation limits

• Greater distribution flexibility

• No tax penalty for distributions before age 59 ½

• No required minimum distributions at age 70 ½

How a nonqualified plan compares toa 401(k) plan

* Subject to plan provisions.

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Nonqualified plan considerations

• Your employer is making a contractual promise to pay benefits shown in your account.

• Assets to informally finance plan owned by employer• Assets to informally finance plan subject to creditors

in the event of bankruptcy

Nonqualified plan “funding”

• Deferral elections: made annually before calendar year and generally irrevocable

• Distribution elections: required at enrollment and changed only with restrictions

Deferral & distribution elections

• Balances not available for loans/rollovers to another plan or an IRARollovers

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How can you use the plan to meet retirement and other savings goals?

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Nonqualified plan accounts

*Subject to specific plan provisions

Retirement account

Save for retirement/net worth

Payable upon separation from service

Payable in lump sum or installments – you decide*

In-service account(s)

Save for specific event/purchase

Save for college education

Set aside funds with no tax penalties for distributions

prior to age 59 ½.

Payable at predetermined date in lump sum or installments

– you decide*

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Decisions you’ll need to make & information to help make them

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Decisions you need to make

Review your Plan Summary to understand plan-specific benefits offered by your employer.

1. How much should I defer?

2. How do I invest my contributions?

3. When & how do I want to receive my benefits?

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Deferral amount

Think about how much money you will need at retirement & for other personal financial goals.

How much do I need to meet my retirement and other savings goals?

How much can I currently afford to defer?

1. How much should I defer?

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Online tools that can help

Retirement Savings Worksheet

Calculates percentage of current compensation savings needed to meet retirement goals

Deferral Calculator• Shows the differences between tax-

deferred and after-tax investing

• Shows expected distribution amounts based on your assumptions

1. How much should I defer?

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Investing contributions

2. How do I invest my contributions?

Review your Plan Summary and investment options available to understand plan-specific options offered by your employer.

What type of investor are you?

What is your short-term & long-term investment philosophy?

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Online tools that can help

Investor Profile Quiz• Answer questions to help determine your

risk tolerance.

• Use risk tolerance results and time horizon to help choose an appropriate investor profile.

• Using profile, choose from available reference investments that best suit your needs.

2. How do I invest my contributions?

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Online tools that can help

Fund Fact Sheets

Summary information on investment options:

• Long-term returns

• Comparison by benchmarks and peer groups

• Risk and return stats

• Morningstar category

• Operations information

• Portfolio manager

*Sample sheet for illustrative purposes only. Specific investment options available will be determined by your employer.

2. How do I invest my contributions?

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Receiving plan benefits

Review your Plan Summary to understand plan-specific qualifying distribution events and distribution options offered by your employer.

For what events will you receive distributions from the plan?

What distribution options would be best for you in each event?

3. When & how do I want to receive my benefits?

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Distribution scenarios to consider

3. When & how do I want to receive my benefits?

When do you plan to retire?

Will you have other funds available on your retirement date?

Should you use nonqualified benefits to help “bridge” your retirement while you await availability of Social Security or qualified plan benefits?

Do you have in-service savings needs such as college savings or savings for a major purchase?

Do you want to receive benefits in a lump sum or in installments*?

*Subject to specific plan provisions21

Managing accounts & distributions

Savings Objectives

• College needs for child

• Vacation home

• Build retirement savings

Participant Base Salary $120,000 and Bonus $40,000

Participant elects to defer 10% of Base Salary and 50% of Bonus

Annual Deferral Amounts

Base = $12,000 (10% of $120,000)

Bonus = $20,000 (50% of $40,000)

Total = $32,000

Pay June 2016

Pay At Separation

An example of a participant deferral decision

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Managing accounts & distributions

Asset Allocation Strategy/Timing

Conservative/Short-term

Moderate/Middle-term

More aggressive/Long-term

20% College 20% Vacation home 60% Retirement

$6,400

August 2016

$6,400

April 2020

$19,200

Pay at separation

4 annual installments

An example of allocating the deferral amounts

Lump sum payment

7 annual installment

s

Income taxes payable in year

$ received

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For Financial Professional Use Only

Five items to do next:

1. Review enrollment & investment materials provided.

2. Assess your retirement & other savings needs.

3. Consult with your advisors.

4. Finalize decisions on deferral, distribution & investment elections.

5. Enroll in the plan.

What are your next steps?

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How to enroll

Begin taking advantage of this unique benefit to meet your retirement goals!

Access the Nonqualified Plan Enrollment Center at www.principal.com

Follow the step-by-step instructions provided in your Online Enrollment Guide.

If you need assistance, call 866.694.6386

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Congratulations!

Thank you for joining us to learn about this important benefit!

Your employer values your service and hopes you’ll take advantage of this opportunity.

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While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion

and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or

accounting obligations and requirements.

Insurance issued and plan administrative services provided by Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, 800-247-1737, member SIPC, and/or independent broker/dealers. Securities sold by a Princor Registered Representative are offered through Princor®. Principal Life and Princor are members of the

Principal Financial Group®, Des Moines, Iowa 50392.

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.

DC16-01 | 09/2012 | t120901002e

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