Compliance Testing Webcast

1. Compliance Testing Webcast Presented by: Caroline Sanfilippo, Compliance Analyst January 2013

2. Compliance Testing Webcast Your Web Page The 2012 Compliance information is located on your Plan Sponsor Website at www.pentegra.com under the Administration tab, on the Compliance page. Refer to the sub sections below for details: Definitions and Instructions • Important Compliance Testing Dates • Census Definitions and Instructions • Instructions to Download/Upload Census Data File  Compliance Forms  Participation and Coverage Questionnaire W-2 Election Form (if applicable) Data Downloads  Census Data File download (***IMPORTANT*** you must save the download file as an Excel file type to your local desktop before entering data changes.)

3. Data Collection The 2012 Non-discrimination Testing will be performed in the order in which complete and accurate data is received. That is, testing begins upon receipt of both the completed and signed Participation and Coverage questionnaire and the Census Data File.   The Participation and Coverage questionnaire consists of four pages. Once completed, it can be uploaded to the website , scanned and e-mailed to JBentivoglio-Moreno@pentegra.com or faxed to the Compliance department at (914) 694-9384.  The Census Data File must be uploaded through the SecureFile Upload section of the Compliance page. Complete instructions are located under Definitions and Instructions, refer to Instructions to Download/Upload Census Data File.

4. Data Collection (continued) The initial review usually occurs within a week of receiving the data. Your Compliance Analyst will perform an initial review of the Participation and Coverage Questionnaire and the Census Data File. You will be contacted if any information has been omitted or if there are outstanding items that need clarification.   It is our goal to assist clients in securing complete and accurate data necessary for testing.  You will notice that we provide specific guidelines in the Annual Compliance Guidelines for when we need to receive the data to ensure timely completion of your test.

5. Supplemental Resolutions Each November the Defined Contribution Services department announces the availability of the Supplemental Resolutions. These are sent to all of our 401(k) and/or Profit Sharing program sponsors. The Supplemental Resolution permits the Participating Employer or Plan Sponsor to make a one-time additional employer contribution on behalf of contributing employees, to increase your matching contributions for the year, or on behalf of all eligible employees, to add an element of profit sharing to your plan. The Compliance test may be impacted depending on the type of Supplemental Resolution that has been completed.

6. Supplemental Resolutions (continued) The Supplemental Resolution – 1 must be received by our office by February 28, 2013. This contribution will be reflected in both the ACP and 415 Tests. The Supplemental Resolution - 2 can be returned up until March 2013. This contribution will be reflected on the 415 Test. • If you have previously funded a Supplemental contribution and have submitted your 2012 Supplemental Resolution, the testing for your plan will be placed on hold (even if we have received your completed Participation and Coverage Questionnaire and the Census Data File) until you have funded the contribution. This will avoid having to re-run any of the applicable tests once the Supplemental Resolution/Contribution has been received and processed respectively. • Processing of the Supplemental contribution usually takes 2-3 business days to complete.

7. Coordination of the Participation and Coverage Questionnaire and the Census Data File information Section C. Specifically questions 1 and 6 should tie into the employee information that is provided on the Census Data File. Section C. 1. Enter the total number of employees employed during the period. It is imperative that you indicate the total number of all of your employees even if they are not eligible or have chosen not to participatein the plan. Note: We need this information so that all eligible non-participating employees are represented on the ADP and ACP tests. Section C. Questions 2 and 5 allow for a reduction for those employees who are not eligible to participate in the plan due to age/service requirement and/or statutory exclusions outlined in the plan document. The Census Data File should include each person that is included in the headcount information on questions C3. and C6. of the Participation and Coverage Questionnaire.

8. W-2 Compensation Election Note – Only participating employers in the Pentegra Defined Contribution Plan for Financial Institutions are required to complete the W-2 Compensation Election form. If the W-2 Compensation Election form was completed and you have chosen Option B (election to use partial compensation), additional information must be provided on the Census Data File in Column N (Partial 2012 W-2 Compensation) and Column S (Partial Section 125 + Transportation Fringe).  Further, if you choose to report partial compensation and Section 125 +Transportation Fringe, you still have to report Total W-2 earnings and Section 125 + Transportation Fringe. In order to report partial compensation for those employees who became eligible during the plan year, you must first determine when the employee became eligible and his/her entry date.

9. Partial Compensation example For example, if Joe Smith met the age and service requirements of the plan as of July 26, 2012 and the next plan entry date was the first of the month following completion of the eligibility requirements, he would enter the plan on August 1, 2012. Next, you must calculate his compensation from August 1, 2012 to December 31, 2012. This is the amount you would report in Column N (Partial 2012 W-2 Compensation).  If any pre-tax deductions for medical, dental, eye care, AFLAC, flexible spending, and /or dependent care were made it is necessary to calculate the pre-tax deductions for the same time period as the compensation ( August 1, 2012 to December 31, 2012). Provide these amounts in Column S (Partial Section 125 + Transportation Fringe) on the Census Data File.

10. Highly Compensated Employees Highly Compensated Employees (HCEs) are defined as follows: Any employee who has earned more than $110,000 in the prior Plan Year. • A 5% owner of the company in the prior Plan Year or the current Plan Year. • A lineal descendant of a 5% owner. This would include a spouse, child, grandchild and parents. Eligible Non-Participating Employees are those individuals that are employed with your organization and HAVE met the plan’s eligibility requirements but have chosen NOT to defer any salary. They have not exercised their right to participate in the plan.

11. W-2 Wages Compensation for 2012 terminated employees is necessary. If an employee/participant terminated during 2012 and he/she was eligible to participate in the plan, please provide his/her 2012 W-2 Box 1 Wages and Total Section 125 + Transportation Fringe amounts. These individuals MUST be reflected in the ADP/ACP tests.  W-2 – Wages – Box 1 Refer to the 2012 W-2 Wage and Tax Statement and enter the amount that appears in Box 1 – Wages, Tips and Other compensation.

12. New Enhancements for 2012 In order to streamline the testing process, the Census Data File has been enhanced by pre-populating the following fields with the information from Pentegra’s files:  • Employee 401(k) Contributions (Column O) • Roth Employee Contributions (Column P) • Employer Matching Contributions (Column Q) • Stock Owners (Column T) • Officer Status (Column U) • Family Members (Column V)  Please review the pre-populated information and confirm that the data is correct. Also, identify any additions or deletions. For example any new officers, stock owners or family members. If the contribution information requires an adjustment, notify your Account Representative and make a note in Column W (Additional Comments) on the Census Data File.

13. Imputed income and Group Term Life Insurance Money that has been paid towards Group Term Life Insurance (GTL) in excess of $50,000 is reported in Box 1 on the W-2 – Wage and Tax Statement.  Do not add the amount for the Group Term Life Insurance to Box 1 wages as this will inflate compensation. Imputed income is a term the Internal Revenue Service (IRS) applies when they feel that the value of a benefit or service should be considered as income for the purposes of calculating your federal taxes. Only a few benefits may count as imputed income: • Basic life insurance in excess of $50,000 (non-bargaining unit employees only)• Medical and dental insurance coverage for domestic partners and their dependents

14. Section 125 and Transportation Fringe Benefits Items that should be included in Column R (Total Section 125 + Transportation Fringe) and Column S (Partial Section 125 + Transportation Fringe) on the Census Data File include but are not limited to pre-tax deductions for:  • Medical • Dental • Eye Care • Dependent Care • Flexible Spending • AFLAC • Transportation Fringe Benefits – such as car expenses  Note: These pre-tax deductions are located in your payroll records and on the W-2 Box 10, Dependent Care Benefits. Please consult the payroll records for specific details on the items listed above.

15. Stock Owners and Officers Stock Owners For Compliance testing purposes under Column T (% Stock Owners) it is necessary to report any Stock Owners that are: • 5% owners in the previous year • 5% owners in the current year • 1% owners in the current year with compensation of $165,000 It is not necessary to report Stock Owners who retain less than 5% ownership unless they meet the compensation threshold of $165,000 in 2012.   Officers In Column U (Officer Status), report any Officer of the organization that fulfills an executive role. Also, identify any Officer who has a Fiduciary duty towards the Plan. This would include members of the Plan Committee and Plan Administrator. It is not necessary to identify those Officers who are not on the Plan Committee and whose compensation is less than $110,000 in 2012.

16. Family Relationships In Column V (Family Member), identify the Social Security Number of the family member. In Column W (Additional Comments), indicate the relationship to other participant(s). It is necessary to report relatives specifically, lineal descendants to any 5% owners. These family members are also considered Highly Compensated Employees for the testing period.

17. Other important items Rehire Information If an employee who was previously employed has returned to service, indicate the rehire date in Column I (Rehire Date).  For determining eligibility it is necessary for us to know the original hire date which should be in Column H (Hire Date).  Hours for non-eligible employees Depending on the eligibility requirements for the plan, particularly the hours of service requirement, add a comment in Column W (Additional Comments) as to whether these individuals have met the hours of service requirement for participation in the Plan.  This is important for employees who work part-time and are not identified on the census.

18. Name Changes Identify name changes for any employees in Column W (Additional Comments). If the Change in Name Form has not been submitted for the employee/participant please complete and submit to your Account Representative so the employee/participant record can be updated.  Note: Changes to any of the pre-populated data should be identified in the Column W (Additional Comments).