Strategies to help solve your key employee challenges

Strategies to help solve your key employee challenges Take care of top talent. Protect your bottom line. Month Day, Year Presenter 1 name Presenter 2 name (or delete) Title(s), designations

Insurance issued by Principal National Life Insurance Co. (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Securities offered through Principal Securities, Inc. , 800 -247 -9988, Member SIPC, and/or independent broker/dealers. Principal National, Principal Life and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 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®. Principal, Principal and symbol design and Principal Financial Group, are trademarks and service marks of Principal Financial Services, Inc. , a member of the Principal Financial Group. Not FDIC or NCUA insured May lose value • Not a deposit • No bank or credit union guarantee Not insured by any Federal government agency B B 1 1 4 0 0 - 0 4 | 0 1 / 2 0 | 1 0 3 7 5 3 5 - 1 2 2 0 1 9 | © 2020 Principal Financial Services, Inc.

Insurance issued by Principal National Life Insurance Co. (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Securities offered through Principal Securities, Inc. , 800 -247 -9988, Member SIPC, and/or independent broker/dealers. Principal National, Principal Life and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 50392. <BGA or Bank Name> is not an affiliate of any member company of the Principal Financial Group®. 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®. Principal, Principal and symbol design, and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc. , a member of the Principal Financial Group. Not FDIC or NCUA insured May lose value • Not a deposit • No bank or credit union guarantee Not insured by any Federal government agency B B 1 1 4 0 0 - 0 4 | 0 1 / 2 0 | 1 0 3 7 5 3 5 - 1 2 2 0 1 9 | © 2020 Principal Financial Services, Inc.

Take care of top talent. Protect your bottom line. Who are your difference makers? Employees whose departure would most impact your: • Operations • Customer relations • Profitability • Recovery time

Take care of top talent. Protect your bottom line. How can you recruit them, retain them, and help protect your business? Key employee benefits Key person insurance

Key employee benefits Recruit, reward, retain, and retire top talent

Key employee benefits The right benefits can make all the difference Recruit Attract top talent with a competitive benefits package. 7 Reward Provide performance-based contributions to achieve organizational goals. Retain Encourage loyalty by helping secure financial futures. Retire Offer additional retirement savings and long-term income diversification options.

Key employee benefits What types of key employee benefits can be effective? Deferred compensation plans 8 Bonus plans

Key employee benefits Deferred compensation: benefits & considerations for your organization Benefits • Key employees recognize it’s a valuable benefit • Contributions not allowed in qualified plans may be restored • Company incentive contributions will be attractive to key employees • Assets accumulated to informally finance the plan remain an asset of your company 9 Considerations • Deferred income tax deduction • Potential charge to earnings on assets used to finance the plan • May have administrative service fees • May require human resource time to communicate plan benefits to participants

Key employee benefits Deferred compensation: benefits & considerations for key employees Benefits • Ability to accumulate additional retirement income • May have the opportunity to defer compensation in excess of qualified plan limits on a pre-tax basis • Contributions, benefits, and earnings accumulate taxdeferred 10 Considerations • Limited ERISA protection • Assets financing the plan are owned by the organization and subject to creditors • No loan provisions or rollover provisions into an IRA, qualified plan, or nonqualified plan

Key employee benefits Bonus plan: benefits & considerations for your organization Benefits • Easy to communicate and maintain due to straightforward and flexible plan design • Your organization receives a current tax deduction on bonuses contributed to the plan • Plan is exempt from annual reporting and ERISA 11 Considerations • Asset isn’t corporate-owned • Each bonus paid reduces organization cash flow

Key employee benefits Bonus plan: benefits & considerations for key employees 12 Benefits Considerations • Overcomes limitations on amount highly paid employees can save for retirement • Enhanced retirement benefits • Employee owns the asset • Depending on asset used to fund plan, earnings may be taxdeferred • Current taxes on bonuses may be offset with an additional bonus • Bonus may require continued employment • Taxation of earnings may apply depending on asset used

Key person insurance Protect your business from the financial loss of a key employee

Key person insurance Why key person insurance? • Can provide protection for your business when a key employee dies, becomes disabled, or leaves • Provides death benefit protection and cash value liquidity that acts as a financial cushion to help you: ‐ Recruit ‐ Hire ‐ Train * 2019 Principal Financial Group Business Owner Survey, conducted by Harris Insights & Analytics. 54% of business owners don’t have a business protection plan in place. *

Key person insurance The costs of losing a key employee • Contractual benefits due to employment contracts • Management and staff disruption • Disruption of revenue stream • Loss of skill & expertise • Loss of reputation and recruiting power

Key person insurance Additional challenges for your business • • • Finding a replacement—internal or external Timeframe—death vs. disability vs. departure Meeting outstanding obligations Maintaining business continuity Protecting relationships

Key person insurance How key person insurance works The business is the owner and beneficiary of the policy for each key employee.

Key person insurance How much key person insurance do you need? We can provide a comprehensive report that includes: • How much life insurance you may need on your most valued employees • A quick quote for 10‐, 15‐, 20‐, and 30‐ year term products

Key person insurance Funding options Life insurance Sinking fund Cash flow funding Years

Key person insurance Funding with insurance Life insurance • Term insurance • Permanent insurance Disability insurance • Key person replacement insurance

Recap: Solutions to your key employee challenges Key employee benefits Key person insurance

Questions?

Thank you Get in touch with any questions Presenter 1 name Presenter 2 name (or delete) Phone Email Website B B 1 1 4 0 0 - 0 4 | 0 1 / 2 0 | 1 0 3 7 5 3 5 - 1 2 2 0 1 9 | © 2020 Principal Financial Services, Inc.