Consulting Services Industry Expertise About Insights Search Contact Disclosure of Compensation Disclosure of Compensation Direct Compensation Segal clients pay us directly for services in three ways: through a negotiated annual retainer amount, generally payable in monthly installments, covering specified services; on a flat fee basis for specific projects; and through periodic billings based on our hourly time charges. Your specific arrangement is detailed in your retainer agreement with Segal, or described in other communications between you and Segal. If you would like a copy of your most recent retainer or other agreement with us, please call your Segal representative. A list of our offices can be found here. Indirect Compensation Effective January 1, 2013, we do not receive indirect compensation related to our pension plan clients. Insurance brokerage services for fiduciary liability insurance, fidelity bonding, employment practice liability insurance, and cyber liability insurance are no longer provided by The Segal Company, but are instead offered by Segal Select Insurance Services, Inc. (Segal Select), a wholly-owned subsidiary of The Segal Group. For information regarding compensation paid to Segal Select, see the compensation for insurance brokerage section below. In any case in which a client requests assistance with the purchase of an annuity, the work is performed by Segal Advisors, Inc. (dba Segal Marco Advisors). For information regarding compensation paid to Segal Marco Advisors, see the disclosure. Gifts, gratuities, and non-monetary compensation From time to time, third-party vendors may provide Segal (and its affiliates) with non-monetary gifts and gratuities, such as promotional items (i.e., coffee mugs, calendars, or gift baskets), and access to certain industry related conferences and meals associated with those conferences (collectively, “gifts”). Segal has implemented policies and procedures intended to identify, quantify, and track gifts received by it and its affiliates. Pursuant to rules established by the Department of Labor, Segal has implemented a policy for allocating the value of a gift among multiple clients, where applicable. Under such policy, where potentially reportable compensation is received by Segal (including its affiliates) in connection with several clients, Segal will first divide the fair market value of such gift by the number of individual clients to which such gift is reasonably applicable and then allocate the result to each affected client to determine if it exceeds the de minimis threshold under the Section 408(b)(2) regulation and related and associated guidance. Based on historic trends, Segal does not expect to receive gifts in excess of the de minimis threshold under the regulations with respect to your Account. Compensation for Termination of Your Account We do not receive a termination fee or apply a penalty when your agreement with Segal is terminated. Disclosure of Compensation for Health & Welfare Clients Segal Consulting (“Segal”) provides life and health benefits consulting services on behalf of our group clients to assist them with the design, management and service of employee benefit programs. Our basic services include: Innovative Plan Design Strategy and Analysis Budgeting/Financials Claim and Eligibility Audits Cost Modeling Data Mining and Benchmarking Wellness/Individual Health Management Total Health Management Health Plan Compliance Network Analysis Prescription Drug Benefits Vendor Competitive Bidding and Renewa Negotiations Funding Arrangements Employee Contribution Employee Communications and Plan Enrollment Retiree Health and Retiree Health VEBAs While the above-mentioned services will typically be charged on a fee-for-service basis*, there are three areas that may result in additional compensation, in the form of commissions: The placement of Life, Accident and Health benefits for which we accept commissions, where insurers will not remove them from premiums or where required by public procurement rules The placement of medical stop loss coverage for which we provide the option to conduct competitive bids and services on a commission basis Revenue sharing fees for project management services related to Segal’s arrangement with third party technical sub-contractors Voluntary Benefits design and placements. * Presently, fee for service business accounts for over 96% of total Segal revenue. Scope of Practice The Segal Health Practice provides life and health benefits consulting services to collectively bargained multiemployer plan sponsors, public sector plan sponsors, and employers that provide health and welfare benefits to their workers and eligible dependents. We work with plan sponsors to provide them with health services related to benefit plan design, purchasing and negotiating, cost management, data mining and analysis and communications. How We Are Paid The Segal Health Practice’s primary method of compensation for our services, including the placement of insurance coverage, is on a fee-for-service basis. Where we take standard commissions, we must have a written agreement setting forth the compensation arrangement. In addition, our policy is to fully disclose to our clients the amount and basis for the standard commissions. Finally, we will not return (“rebate”) any commissions, excess or otherwise, to any client. Commission or Fee Income Commissions are paid on a formula that is set by each insurance company and filed with the state insurance regulators. Generally, standard commissions are set as a percent of the premiums paid for the insurance policy. In some cases, commissions set by insurers are a fixed, per member per month amount. The range of commissions can vary based upon a number of factors, such as the type of insurance, number and type of product lines sold, and volume. Standard commission formulas paid by insurance carriers to Segal Consulting are pre-set, meaning they will not be increased because of binding coverage with a particular insurer. In addition to standard commissions, we may accept life and health insurance carrier supplemental payments. Supplemental payments formulas are also pre-set by each insurer and the formula is not increased or altered because of binding coverage with a particular insurer. Supplemental payments can be linked to new sales volume or persistency of policies in force with the carrier based on the book of business results for Segal. Segal will accept supplemental payments to be used to finance national investment in research, technology, databases and client education, in order to improve client support services or to offset consulting fees where applicable. We disclose to each client, in writing, the amount of standard commissions we received during the prior year for that client. Often, supplemental payments are derived from book of business results and not from individual client premiums. In these cases, Segal does not report client specific accounting of supplemental payments. Indirect Compensation It is important to note that what we report to clients is the sum total of compensation that the Segal Company receives from a carrier based on individual client premiums. Although, as noted above, we will accept supplemental payments, we: DO NOT accept compensation or reimbursement from any carrier for any marketing expenses. DO NOT accept free entertainment, such as golf or sports tickets, or expenses associated with a carrier-sponsored conference. Segal Health Practice’s staff may periodically participate in carrier sponsored educational seminars, industry events and/or underwriting meetings, but will generally reimburse the carrier for expenses that exceed a specific de minimis dollar threshold. No Influence on Decision Making The way our staff analyzes insurance proposals or makes recommendations regarding types and levels of coverage is objective and is free from any influence by commissions or supplemental payments. Objective analysis and neutrality are core values at Segal Consulting, and the insurance industry recognizes it. We base our recommendations solely on client requirements and objectives. Related Party Transactions Segal does not directly or indirectly own any insurance carrier used to provide insurance coverage to any Segal Health Practice client. Neither the Segal Health Practice nor Segal operates as a managing general agency, managing general underwriter, or wholesaler. Any questions concerning commissions on life and health benefits consulting services, including requests for precise commission amounts and information about any alternative quotes obtained, should be directed to Edward Kaplan, the National Health Practice’s Senior Vice President and National Practice Leader, at 212-251-5212 or ekaplan@segalco.com. Compensation for insurance brokerage services Segal Select Insurance Services, Inc. (Segal Select) provides insurance brokerage services. We work on behalf of our clients to secure the desired insurance product from an insurance carrier. Our basic services include: Assembly of all needed renewal information and presentation of an underwriting submission for quotations. Policy review and analysis. Market strategy and proposed coverage specifications. Coverage negotiations, including necessary underwriting meetings. Quote letters and recommendations. Invoicing, premium collection and remittance to insurer. Policy review and transmittal. Claims reporting. Presentations to the Funds’ Staff, subcommittees of the Board of Trustees, or the Board of Trustees, as appropriate. Q&A responses. Periodic Segal publications. Segal Select’s benchmarking for premium and limit of liability analysis. While the foregoing services will be reasonably provided as part of our basic services, there are two areas that may require additional compensation and would be discussed and agreed to in advance: Time associated with claims advocacy and support services, which support legal counsel during a claim process. Time, travel expenses and out-of-pocket costs such as room and board associated with travel to in-person meetings and presentations. Segal Select focuses on four core coverages: fiduciary liability insurance, fidelity bonding, employment practice liability, and cyber liability insurance. Segal Select also places non-profit directors’ and officers’ liability and other associated miscellaneous errors and omissions insurance coverages. Finally, working with strategic partners that are licensed, independent insurance brokerage firms, we also provide traditional property/casualty insurance brokerage services. For our basic insurance brokerage services, Segal Select is primarily compensated through commissions paid by the insurance carriers. In some situations, Segal Select may agree to a fee, or time and expense compensation arrangement. These arrangements always require a client’s prior approval. Commissions are paid on a formula that is typically expressed as a percent of the premiums paid for the insurance policy. The range of commissions (generally 15% to 20%) can vary based upon a number of factors, such as the type of insurance, whether the insurance placement is a primary or excess layer, or whether another intermediary such as a wholesaler is involved. Commissions paid by insurance carriers to Segal Select are pre-set, meaning they will not be increased as a result of binding coverage with a particular insurer. In addition, the pre-set commissions are not dependent upon a minimum volume of business or profitability of the business placed. We may accept supplemental payments that are derived from book of business results and not from individual client premiums. Because each carrier uses its own formulas to determine supplemental payments, it may not be possible to track these monies to a specific client account. We disclose to each client, in writing, the amount of commissions we received during the prior year for that client. The following chart shows standard commission ranges for different categories of insurance, based on a set percentage of premium paid. Executive liability The primary commission range for executive liability coverage is 15-20%. Coverage types are: Cyber liability Directors and officers Employment practice liability Fidelity bonds Fiduciary Miscellaneous professional liability Traditional property and casualty The following coverage types have a primary commission range of 15-20%. “Package” or “BOP” Automobile General liability Property Disability, and workers’ compensation, have a primary commission range of 5-15%. Excess policies may have a “lower” commission of 10%. It is important to note that we: DO NOT earn any significant float on your premium dollars. Historically, our invoices instruct clients to draw checks payable to the insurance carrier based upon the gross premium, no float is earned. Premium checks payable or wire transfer (ACH) payments to Segal Select are processed in a timely fashion. DO NOT charge any fixed administrative charges for our services. DO NOT accept compensation or reimbursement from any carrier for any marketing expenses. Segal Select periodically works with wholesalers to access additional insurance carriers on behalf of our clients. In these instances, Segal Select’s commission compensation is generally less because a portion of its commission is paid by the carrier to the wholesaler. The wholesaler may negotiate additional commission or other compensation arrangements to which Segal Select is not privy. The way our staff analyzes insurance proposals or makes recommendations regarding types and levels of coverage is objective and is free from any influence by commissions or supplemental payments. Objective analysis and neutrality are core values at Segal Select, and the insurance industry recognizes it. We base our recommendations solely on client requirements and objectives. Segal Select has no related party transactions. Segal Select does not directly or indirectly own any insurance carrier used to provide insurance coverage to any Segal Select client. Neither Segal Select nor Segal operates as a managing general agency, managing general underwriter, or wholesaler. Any questions concerning commissions on brokerage services, including requests for precise commission amounts and information about any alternative quotes obtained, should be directed to Diane McNally. 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