The ABC Company 401(k) Plan: a powerful wealth-building tool available to our employees

1. The ABC Company 401(k) Plan: a powerful wealth-building tool available to our employees As you pursue your financial goals in life – whether it’s paying off bills, buying or refinancing a home, or putting money aside for the future – there are a staggering array of decisions you need to make. So it’s nice when an opportunity comes along which is so compelling that it almost makes the decision for you . . . especially when that opportunity involves someone else giving you money towards your financial future! If you answered “no” to either of the above questions, you are leaving money on the table. Andover long periods of time, this can amount to serious money. The purpose of this article is to illustrate how participating in our 401(k) can benefit you over the long run, and urge you to take full advantage of this exciting program during your years of employment at ABC Company. 401(k) plans – What’s the big deal? The first 401(k) plan was rolled out in 1981, and today, there are over 60 million Americans enrolled in these programs. There are several reasons why these plans are so popular : • Employee contributions to 401(k) plans are made before federal income taxes, and this favorable treatment is recognized by most states. The pre-tax nature of 401(k) contributions allows you to put more money into the plan each year, so this money can go to work for you over time. • Interest, dividends and capital gains within your account build up on a tax-deferred basis, and are only taxed when funds are withdrawn (hopefully in retirement). The benefits of tax-deferred compounding can create a “snowball effect” over time, allowing your account to grow in size, particularly in later years when you have a larger base of investments. • Most 401(k) programs allow each participant to select a mix of investments that is most suited to their time horizon and investment goals. Our plan features an array of no-load mutual funds for you to choose from, allowing you to diversify your account and invest in a low-cost environment. • Thanks to increased limits, employees can now contribute more than ever to their 401(k) plans. The pre-tax contribution limit for 2007 is $15,500. In addition, employees over age 50 can make a special “catch-up” contribution. This amounts to an additional $5,000 per year, for a total pre-tax contribution of $20,500 for those employees. The ABC Company 401(k) Plan should be a primary component ofyour overall financial picture. So here are two questions to ask yourself — Are you currently participating in the 401(k) plan? Are you contributing 6% of salary or more?

2. But that’s only half of the story. Perhaps the most significant aspect of the plan is the generous matching contribution. ABC Company matches the first 3% of employee contributions dollar-for-dollar, and the next 3% of employee contributions at 50 cents on the dollar. The result is that if you contribute 6% to the plan, you will receive another 4.5% in matching contributions, for a total contribution of 10.5% of pay. Note that matching contributions are vested immediately to you as an employee, which is another enticing feature of our plan. The company contributions that are offered within retirement plans vary quite a bit from employer to employer. Some plans feature employee contributions only (no match). Others feature a modest match, or one that may be based on year-end financial performance. Only a few employers make a matching contribution as generous as ours. But just how much of a difference can this match make over time? Ending account value for Dan and Jill saving 6% and 10% of pay, in a 401(k) plan without a match* Ending account value for Dan and Jill saving 6% and10% of pay, through our 401(k) plan* What about our company matching contribution? To show you the impact, let’s assume we have two employees, Dan and Jill. Dan and Jill are each age 25, earning $20,000 per year, and planning to contribute to their 401(k) until retirement (age 65). Assume that Dan saves 6% of pay and Jill saves 10%, and both earn an annualized 8% rate of return within their account. Let’s see how they would fare by age 65 under two different scenarios: As you can see, Dan’s final account value would be approximately $478,547 compared to $797,579 for Jill. Certainly, not bad. Now let’s look at a second scenario. We’ll assume all the same information, except now Dan and Jill work for ABC Company and participate in the 401(k) plan. As you can see, the ending account values are a lot more impressive thanks to the matching contribution. In this case, Dan and Jill each ended up with an additional $358,910 at retirement thanks to the 4.5% in additional contributions they received each year. Are you taking full advantage of the ABC Company 401(k) Plan to secure your long-term financial future? As you can see, the plan gives you a terrific means of investing for retirement, and is an important part of your total compensation picture. If you would like to enroll in the plan or increase your rate of savings, please follow the instructions on the attached form. As always, please call Human Resources with any questions you have on this exciting program. This original draft of this piece was created by Federated Investors; it may not be used without Federated’s express consent. * Illustration assumes starting salary of $20,000, annual contribution rates of 6% and 10% of pay, continuous participation without account distributions, In 8% annualized rate of return (with reinvestment of all earnings), and annual cost-of-living adjustments of 3%. Actual results will vary based on market conditions and performance, individual investment decisions and other factors. This illustration does not provide any guarantees regarding fund investment returns or matters of plan design. Always read the prospectus before investing.