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March 2012

New Ideas About The Distribution Phase

Mark Fortier Head, Product & Partner Strategy—DC Investments

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Offer employees a highly attractive participant-paid benefit

Potential tool to attract and retain talent

Help simplify worker investment and retirement income planning

Help motivate and encourage savings

Help provide the security—and confidence—employees need to retire

Why Offer an In-Plan Lifetime Income Strategy? Key Employer Benefits

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Low cost distribution

Lower behavioral and anti-selection risks from default investors

Lower capacity risks from a multi-insurer structure

An customer that values risk management

An customer that values the security and confidence needed to retire

Why Offer an In-Plan Lifetime Income Strategy? Key Insurer Benefits

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“Active Investors” (43%) “Accidental Investors” (57%)

I want a well-diversified mix of investments (48%)

I want the ability to withdraw all or part of my money with no fees/penalties (48%)

I want the ability to withdraw all or part of my money with no fees/penalties (51%)

I want protection of principal (46%)

I want a steady income stream in retirement

Actives: 66%/Accidentals: 68%

Most Important Investment Features: Control and Certainty

Source: AllianceBernstein Research Survey, March 2011

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As of December 31, 2011Source: AllianceBernstein

Issue

Product

DC Sponsors May Have Concerns Over Adding In-Plan Income Solutions

Fiduciary

Expense

Communication

Portability

Rationale

Concerns that products are too new; can’t take advantage of upgrades

Extended responsibility, including insurer selection and monitoring

Cost of insurance versus investments

How to add it to the investment menu; How will participants understand it?

Concerns that participants can’t leave plan and preserve benefit, or that sponsor is “locked into” a package

What’s the benefit to the employer?

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As of December 31, 2011Source: AllianceBernstein

Issue

ProductConcerns that products are too new; can’t take advantage of upgrades

Extended responsibility, including insurer selection and monitoring

Cost of insurance versus investments

How to add it to the investment menu; How will participants understand it?

Our Approach to Addressing Key Sponsor Concerns

Fiduciary

Expense

Communication

Concerns that participants can’t leave plan and preserve benefit, or that sponsor is “locked into” a pack

Portability

What’s the benefit to the employer?Rationale

Lifetime Income Strategy Approach

Combines age-based investing and GLWBs, neither of which are new, in an open and extensible architecture

Designed to serve as a QDIA; independent fiduciaries can perform insurer selection and monitoring

Insurance and investments cost structures are different; insurance in-plan can be a fraction of retail costs

Single investment option with a singular focus: secure income

Built to support provider, plan and participant portability

Improved workforce management through a participant-paid benefit

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Target-Date Funds Can Be Good QDIAs, But What’s Next?

Asset Class Funds

. . .MoneyMarket

Fixed Income

US Stock

Target-Date Funds

. . .2050 2045 2000

QDIA: Target-Date Funds 10+ target-date funds “Pick-a-Date” complexity Accumulation focused Not personalized

Plan Menu Today

Asset Class Funds

. . .MoneyMarket

Fixed Income

USStock

Target-Date Funds

. . .2050 2045 2000

Lifetime Income Strategy

QDIA: Lifetime Income Strategy Single investment Completely simple for participants Accumulation + retirement income Personalized

Plan Menu Tomorrow?

Illustrative Example of Large DC Plan Menus