Boyce Thompson Institute

Retirement Plan

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Background BTI currently sponsors a combination of two retirement

income plans: Defined Benefit Plan 403(b) Plan

In the fall of 2005, BTI engaged BPA-Harbridge to: Examine the structure of benefits provided by its current

retirement income program Survey other employers who are competitors for the pool

of talent upon which BTI draws Survey its employees regarding the appreciation and

understanding of its benefits program Guide the process regarding any potential redesign of the

retirement program What would the program be if starting from scratch? How do we get there from here?

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Background Number of defined benefit plans peaked in 1985 at

114,000…at end of 2005 there were approximately 30,000

Most colleges and universities transitioned to a defined contribution plan only model (e.g. 403(b) plan) years ago

In the past two years many large corporations have frozen the benefits of their defined benefit plans

IBM Sprint Nextel GM Delta Hewlett-Packard Verizon Lockheed Martin Motorola

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Summary of Current Retirement Plans Defined Benefit Pension Plan

Benefit is larger of two amounts Annuity payable at age 65 equal to 2% of high 36

month average compensation multiplied by years of service, capped at 33 years

Annuity that is actuarially equivalent to cash balance account balance

Account balance is credited with service credits (i.e. 7% of compensation) and interest credits (i.e. yield on 10-year Treasuries)

Benefits generally paid in the form of a life-time annuity If the lump sum equivalent of the benefit is $50,000 or less

it could be paid out as one-time lump sum Lump sums can be rolled over to another qualified

retirement plan or Individual Retirement Account or Annuity (IRA)

Vesting is 100% after three years of service

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Summary of Current Retirement Plans 403(b) Plan

Employees can make contributions through pre-tax salary deferrals (In 2006, maximum is $15,000 plus $5,000 catch up contributions if over 50)

BTI matches contributions dollar for dollar up to 3% of compensation

Vesting on employer contributions is immediate

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The Process Current Retirement Program is very competitive when

compared to other employers The 403(b) plan is well understood and appreciated by

employees The Defined Benefit Plan is not understood as well BTI management and the Board concluded that if

starting “from scratch” a 403(b)-only approach would likely be the design

That said, many current employees are in the middle of their careers and moving to 403(b)-only, at this juncture, was not considered appropriate

Management considered options, made recommendations to the Board which they subsequently discussed and approved

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New Retirement ProgramEffective January 1, 2007 Combination of Cash Balance Plan and 403(b)

Plan Employees employed on September 30, 2006

will have a choice of being covered by current plan or new retirement program For those deciding to stay under the current

program, it’s as if nothing happened with the exception of the investment choices for new 403(b) contributions

BTI reserves the right to make changes to the current plan at any time in the future

All those hired on or after October 1, 2006 will be covered by the new program

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New Retirement ProgramEffective January 1, 2007 Cash Balance Plan

Combination of benefit accrued as of December 31, 2006 plus cash balance account for 2007 and beyond

Cash balance plan benefit for 2007 and beyond will equal an account balance that is credited with service credits and interest credits

Service credits equal to 3% of compensation Those with more than 33 years will still receive a service

credit Interest credits will equal yield on 10 year Treasuries

At termination of employment or retirement employee will have option of an annuity or a lump sum

Lump sum will equal the (1) actuarial equivalent of the benefit accrued at December 31, 2006 plus (2) the cash balance account balance

Lump sum will be offered regardless of the size New death benefit available will be a one-time lump sum in lieu

of an annuity

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New Retirement ProgramEffective January 1, 2007 403(b) Plan

Current matching contribution (100% of first 3% deferred) is unchanged

New employer contribution, regardless of how much the employee defers

This will be subject to a 3 year cliff vesting schedule

Investment direction by the employee More details regarding the 403(b) plan will be

provided in a presentation specific to that plan No maximum service to receive the

employer contribution

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Contribution Rates for those employed by BTI at Transition Split annual employer credits between Cash

Balance Plan and 403(b) Plan:Total

Years of CB 403(b) Employer Credits/Service Plan Plan Contributions

less than 5 3% 4% 7% 5-9 3% 6% 9% 10-14 3% 9% 12% 15-19 3% 11% 14% 20-24 3% 13% 16% 25-29 3% 15% 18% 30 or more 3% 17% 20%

In addition, the 3% match in the 403(b) plan will be maintained

Employer contribution to the 403(b) plan will be based on the service of the employee as of December 31 of the year the contribution is credited

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Contribution Rates for those hired after Transition Split annual employer credits between Cash

Balance Plan and 403(b) Plan:Total

Years of CB 403(b) Employer Credits/Service Plan Plan Contributions

less than 5 3% 4% 7% 5-9 3% 6% 9%10 or more 3% 9% 12%

In addition, the 3% match in the 403(b) plan will be maintained

Employer contribution to the 403(b) plan will be based on the service of the employee as of December 31 of the year the contribution is credited

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“Choice” The “choice” is a one-time election made by the

employee to either continue to be covered by the current DB formula and 403(b) match or be covered under new DB formula and 403(b) contributions

Each employee will be given projections of benefits at various dates in the future (5 and 10 years out) as well as at various retirement ages (age 55, 62, and 65)

BTI wants all employees to complete an election form Those not completing an election form will be covered by

the new plan In other words….if you want to continue to be covered by

the current plan you must complete an election form

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Comparison of Current vs. New Plan Current Plan

Most of the retirement benefits are provided through a defined benefit plan

The defined benefit plan pays most benefits in the form of a lifetime annuity

Only those with benefits worth less than $50,000 have the option of a lump sum

Death benefits are also generally paid as an annuity for retiree and spouse

New Plan Most of the benefits accruing in the future will be provided in the

403(b) plan All benefits will be able to be paid as a lump sum at termination of

employment, retirement or to a beneficiary as a death benefit if you die before leaving BTI

Employee still retains ability to take benefits in the form of a lifetime annuity

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Sample Benefit IllustrationBasic Information:

Date of Birth: 10/8/1974 Years of Benefit Service as of 1/1/07: 6.333Date of Hire: 9/18/2000 Vesting Percentage: 100%Normal Retirement Date (NRD): (age 65) 11/1/2039 Earliest Retirement Date (ERD): (age 55) 11/1/2029

CurrentPlan

A

Cash Balance

PlanB

403(b)Plan

CTotal

D=B+C

PercentChange(D-A)/A

CurrentPlan

Cash Balance

Plan403(b)Plan Total

Accrued Benefit as of 1/1/2007: 9,690 9,690 0 9,690 0% 14,058 14,058 0 14,058

Estimated Projected Benefits:

As of 1/1/2010: 13,901 11,619 4,259 15,878 14% 24,064 20,114 6,806 26,920

As of 1/1/2012: 16,457 12,795 8,319 21,114 28% 32,054 24,922 14,962 39,884

As of 1/1/2017: 22,034 15,384 18,716 34,100 55% N/A 40,265 45,274 85,539

Payable at age 55 (ERD): 20,569 8,699 19,000 27,699 35% N/A 114,385 261,862 376,247

Payable at age 62: 47,238 16,324 40,739 57,063 21% N/A 189,474 506,259 695,733

Payable at age 65 (NRD): 63,253 21,376 51,949 73,325 16% N/A 232,275 610,579 842,854

Estimated Projected Pre-RetirementDeath Benefits Payable to Beneficiary:

At age 55: 17,889 7,968 18,546 26,514 48% N/A 114,385 261,862 376,247

At age 62: 39,183 14,554 39,438 53,992 38% N/A 189,474 506,259 695,733

At age 65: 51,310 18,801 50,115 68,916 34% N/A 232,275 610,579 842,854

Annual Benefit Amount Lump Sum Value, if applicable

ProposedProposed

(payable at age 65) (payable immediately)

including frozen accrued benefit including present value of frozen benefit

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Next Steps Discuss 403(b) plan in more detail Provide employees with Benefit Comparison Statements We strongly suggest employees consult with a financial

planner to discuss their “choice” Employees elect whether to continue to be covered by

current plan or to be covered by new plan

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Contact Information

Vince Spina, ASA, MAAA President, Harbridge Consulting

Group

(315) 703-8999 vspina@bpah.com

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Burke Group – Richard Burke

Alesco Advisors – Tim Tindall

Custodian – Fidelity Investments

Paying Agent – First Niagara Bank

Boyce Thompson InstituteNew 403(b) Plan – Partners

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Boyce Thompson InstituteNew 403(b) Plan All ongoing employee and employer contributions will

go exclusively to this Plan.

Employee deferrals and employer contributions will cease going to other 403(b) plans (Fidelity, TIAA-CREF, and T. Rowe Price).

Balances in other plans can remain, or can be transferred, at any time, into the new 403(b) Plan at the employee’s discretion.

Immediate eligibility for new 403(b) Plan

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Boyce Thompson InstituteNew 403(b) Plan Pre-tax deferral ($15,000 / $5,000 catch up)

Employer matching contributions (100% on first 3%)

New employer discretionary contribution

100% vesting

Withdrawals for retirement, termination, and hardship

Daily account access and updates

Changes within your account at any time

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Boyce Thompson InstituteNew 403(b) Plan Employer Discretionary Contributions

Hire date prior to 10/1/2006

Hire date on or after 10/1/2006

Years of Service

< 5 yrs 5-9 yrs 10-14 yrs 15-19 yrs 20-24 yrs 25-29 yrs 30+ yrs

4% 6% 9% 11% 13% 15% 17%

% of Annual Compensation

Years of Service

< 5 yrs 5 – 9 yrs 10+ yrs

4% 6% 9%

% of Annual Compensation

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Account Access

On-line access, updated daily On-line enrollment (after 1/1/07) Toll-free Call Center, M-F, 8 am – 5 pm, EST Quarterly statements

Personalized Retirement Planning and Counseling On-site, one-on-one meetings Bring other 403(b) plan information On-line interactive web tools

Demo Website Go to www.worksitecommerce.com Company Code: 287 User ID: 111111111 PIN Number: 1111

Boyce Thompson InstituteNew 403(b) Plan

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Financial Self-Assessment / Model Asset Allocations

Optional: Meet with Financial Advisor

Complete Election Form (new or old plan) by November 8

Complete Enrollment Form (deferral and elections) and submit to Lucy by December 1

Complete Beneficiary Form

Optional: Complete Rollover Form to transfer from another 403(b) Plan

Boyce Thompson InstituteNew 403(b) Plan – Next Steps

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Boyce Thompson InstituteNew 403(b) Plan Advisor

Tim Tindall, Alesco Advisors - Rochester Independent, fee-based, SEC registered investment

advisor Founded in January 2000 $750 million under management/advisement 120 clients: institutional and individuals Institutional accounts include: endowments, foundations

and retirement plans

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Boyce Thompson InstituteNew 403(b) Plan Advisor

Investment philosophy Broad use of index investment strategies

designed to match the returns of the capital markets

Benefits of Indexing1. Strong historical performance relative to peer groups2. Transparency & style purity3. Low costs4. Ability to build a well-diversified

retirement portfolio

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Boyce Thompson InstituteNew 403(b) Plan Investment Options

Value Blend Growth International

Large-CapDFA Large-Cap

Value Vanguard Index 500 Vanguard Growth Index Vanguard Total Int'l Stock

Mid-Cap Dreyfus Mid-Cap Index

Small-CapDFA Small-Cap

Value DFA Small-Cap Fund Vanguard Small-Cap

Growth

Vanguard Total Bond Market Index

Vanguard Target Retirement 2015

Vanguard Target Retirement 2005

Vanguard Target Retirement Income

Federated Capital Preservation

Target Date Funds Vanguard Target Retirement 2045

Vanguard Target Retirement 2035

Vanguard Target Retirement 2025

Fixed Income/Stable Value

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Boyce Thompson InstituteNew 403(b) Plan

Investing for Retirement Long-term – Don’t focus on daily movements

Risk and Return Higher returns = More risk (volatility)

Diversification Spread out risk by owning different investments

across a wide range of asset classes

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Boyce Thompson InstituteNew 403(b) Plan Investment Options

Model Asset Allocations Self-managed

Allocation guidelines available Automatic – Target Date Funds

Use Target Date fund that most closely matches your retirement date

Mix of stocks, bonds and cash - routinely rebalanced to become more conservative over time

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Boyce Thompson InstituteNew 403(b) Plan

BTI Retirement Plan Benefits Meet Return Expectations Lower Expenses – keep more of your return Increased Diversification Reduced Volatility

Eliminate “Manager Risk”