NORTHERN TRUST DEFINED CONTRIBUTION SOLUTIONS THE PATH FORWARD

1. NORTHERN TRUST DEFINED CONTRIBUTION SOLUTIONS THE PATH FORWARD Designing the Ideal Defined Contribution Plan Presenting the Results of Northern Trust’s 2010 Defined Contribution Industry Survey

2. There is too much riding on the success of the defined contribution system to risk getting it wrong % of U.S. DB Participants in a “Frozen” Plan Probability that Social Security Trust Fund Exhausted Total U.S. Pension Assets 1999 vs. 2009 Source: Bureau of Labor Statistics, April 2010. Source: Congressional Budget Office, 2009. Source: Towers Watson, January 2010.

3. Northern Trust launches “The Path Forward” thought leadership series to pinpoint DC industry challenges and potential solutions

4. Participating firms represent 50 of the largest DC plans and several of the most influential investment consultants in the United States Plan Sponsors Investment Consultants Note: Two respondents requested anonymity.

5. The ideal DC plan differs in many ways from our current DC construct

6. 1. Mandatory Participation for all Employees Employees are automatically enrolled into the plan on their first day of employment with no election to opt out, thereby ensuring immediate savings Optional Participation in DC Plan? Plan Sponsors Optional Participation in DC Plan? Consultants Source: Greenwich Associates Research, 2010.

7. 2. Default employee contributions of 5-6% of salary • This contribution rate automatically increases on an annual basis until it reaches 11-12% of salary, the contribution level commonly recommended for retirement security Default Employee Salary Contribution for Auto-Enrollment? Plan Sponsors Default Employee Salary Contribution for Auto-Enrollment? Consultants Source: Greenwich Associates Research, 2010.

8. 3. No limit on post-tax employee contributions • Though limits on employer matching contributions and government-sponsored tax deferral are acceptable, unlimited post-tax employee contributions encourages higher levels of saving Restriction on Maximum Employee Contribution? Plan Sponsors Restriction on Maximum Employee Contribution? Consultants Source: Greenwich Associates Research, 2010.

9. 4. Immediate vesting of employer contributions • Immediate vesting allows today’s more mobile workforce to recognize immediate benefit from plan participation How Long Before Fully Vested? Plan Sponsors How Long Before Fully Vested? Consultants Source: Greenwich Associates Research, 2010.

10. 5. Participant loans are not permitted, unless under duress • Prohibiting loans removes participant temptation from drawing upon balances for non-retirement related expenses, however those due to hardship are the likely exception to this rule Allowed to Take Loans Against Account Balances? Plan Sponsors Allowed to Take Loans Against Account Balances? Consultants Source: Greenwich Associates Research, 2010.

11. 6. Continuation of shared decision-making between plan sponsor and participant • Participants are responsible for investments and asset allocations within guidelines established by sponsors, which enables participants to control their money while ensuring adherence to prudent investment practices Who holds the decision-making power? Plan Sponsors Who holds the decision-making power? Consultants Source: Greenwich Associates Research, 2010.

12. 7. Optimized investment menus • Investment line ups are required to include asset allocation funds like target date or other managed options, but can also include more flexible options for more informed or active participants Ideal Number Investment Options Offered to Employees? Plan Sponsors Ideal Number Investment Options Offered to Employees? Consultants Source: Greenwich Associates Research, 2010.

13. 8. Broad-based advice for participants • Participants have access to advice that not only focuses on investment products, but also long-term financial planning, offered in an environment of reduced concern about potential liability Types of Advice Offered in Ideal DC Plan? Plan Sponsors Types of Advice Offered in Ideal DC Plan? Consultants Source: Greenwich Associates Research, 2010.

14. 9. High levels of fee transparency • Participants receive clear and concise information regarding administration expenses, investment management fees and participant-initiated transaction fees What Fees Need to be Communicated? Plan Sponsors What Fees Need to be Communicated? Consultants Source: Greenwich Associates Research, 2010.

15. 10. Unbundled service structures • Unbundling enables utilization of “best-of-breed” providers Ideal DC Plan Service Structures? Plan Sponsors Ideal DC Plan Service Structures? Consultants 1 1 7 1 4 39 Source: Greenwich Associates Research, 2010.

16. Some steps can be implemented in the short-term with minimal costs to employers or participants Source: Greenwich Associates Research, 2010.

17. Other alterations – in the medium term – will require plan sponsors to make some hard decisions and accept new costs Source: Greenwich Associates Research, 2010.

18. The ideal DC structure requires regulators/politicians to face up to current shortcomings and change regulatory structures Source: Greenwich Associates Research, 2010.

19. In review, the ideal DC plan contains 10 key characteristics

20. Important Information NOT A SOLICITATION. No information provided herein shall constitute, or be construed as, an offer to sell or a solicitation of an offer to acquire any security, investment product or service, nor shall any such security, product or service be offered or sold in any jurisdiction where such offer or solicitation is prohibited by law or regulation. This material is provided for informational purposes only and does not constitute a recommendation of any investment strategy or product described herein. Opinions expressed are those of the presenter(s) and subject to change without notice.