Unisys Retirement Program Changes

Unisys Retirement Program Changes U.S. Employee Benefits March 2006 This e-brochure explains the upcoming retirement program changes for U.S. employees, what they mean to you, and what you need to know. What s Inside Five Things You Can Do Now 4 Retirement Plan Basics 6 Unisys Retirement Program At a Glance 8 Make the Most of the Savings Plan 10 Saving for Retirement A Shared Responsibility 13 Tools for You Tools and resources to help you plan for the changes Available now: Pension Change Hotline: 1-800-340-4533 Frequently Asked Questions (FAQs) Coming soon: Savings and Investment Planning Workshops Personalized Retirement Benefit Statement For Your Benefit Newsletter Features Helpful Links Five Things You Can Do Now Retirement Planning Tools on The Employee Network Unisys Savings Plan: Getting Started Already Saving? Use Fidelity NetBenefits SM Resources Employee Investment Services What s Happening Today? We re on a journey to reposition Unisys for growth and improved profitability. Achieving this target will require changes to many aspects of our business. We ve already refined our solutions portfolio, moved to an account-centric client approach, and changed the way we ll deliver solutions to clients. In addition to these changes, we need to build a competitive cost structure that can support our business today. This means looking at one of our largest and most unpredictable expenses our U.S. pension benefit program. In 2005, our worldwide pension expense was $181 million, and would grow in 2006 if we don t take action now. Employer pension plans and their future are making headlines across the country. It seems like every day we read about another company that is migrating away from a volatile defined benefit pension plan to a more predictable defined contribution savings plan. This trend is not limited to the Information Technology sector or to troubled industries like airline and automotive. Instead, high profile companies like IBM, HP, Verizon and Sears have all recently announced their intent to change how they provide retirement benefits to employees. What Unisys is Doing At Unisys, we re faced with our own set of challenges. We have a significant opportunity to improve profitability by better managing our pension expense. To do that, Unisys will migrate to a portable defined contribution plan, and away from our existing defined benefit plans at the end of 2006. Unisys solution to the pension dilemma is to provide a competitive benefit to our employees while introducing a new level of predictability in planning for pension expense. 1

Unisys will provide the vehicle a redesigned Unisys Savings Plan and greater incentive for you to save for retirement. Beginning January 1, 2007, Unisys will increase its annual company-funded matching contribution to 100 percent of the first six percent of eligible pay you contribute on a before-tax basis, subject to Internal Revenue Service (IRS) limits. Previously, Unisys matched 50 percent of the first four percent of eligible pay contributed on a before-tax basis. This essentially represents a tripling of the company s maximum matching contributions to the Savings Plan. Unisys matching contributions are in Unisys company stock. Also beginning in January 2007, Unisys matching contributions will be eligible for immediate diversification. You ll be able to invest these funds in ways that best meet your retirement savings goals. You will need to visit the Fidelity NetBenefits SM Web site http://netbenefits.fidelity.com after each company contribution is made if you want to diversify the Unisys stock that you received for that payroll period's company-matching contribution. Unisys matching contributions made prior to January 1, 2007 will continue to be eligible for diversification at age 50, but not before. Maximum companymatching contributions will essentially triple. Unisys Savings Plan offers immediate, 100 percent vesting. Future Unisys matching contributions will be immediately eligible for investment diversification. Unlike the Pension Plan, you are immediately 100 percent vested in your Unisys Savings Plan account, including your company-matching contributions and any investment results on your account. This means that if you leave Unisys for any reason, you will be entitled to receive the full value of your Unisys Savings Plan account. Going forward, you will have to share greater responsibility for your retirement planning. If you are not already enrolled as a participant, it will be up to you to decide whether to enroll in the Unisys Savings Plan and determine at what level to contribute. Our Guiding Principles These basic guidelines helped us arrive at the new plan: Strike a balance between controlling our pension expense and continuing to help employees prepare for retirement. Continue to provide competitive benefits to Unisys employees. Engage employees in their retirement planning and saving. Provide a portable retirement savings plan. Continue the shift toward greater employee responsibility for benefits. Reduce pension expense volatility for Unisys. 2

What s Also Changing in 2007 We will no longer accrue future benefits under the company s defined benefit pension plans for employees. This will not affect retirement benefits that you ve earned as of December 31, 2006. Beginning in 2007, the Unisys Pension Plan will no longer accrue future benefits. Your earned benefits through 2006 will not be affected. The changes to the Unisys Pension Plan affect most active employees hired before July 1, 2005 because of the pension plan eligibility rules. Employees hired on or after that date may only participate in the Unisys Savings Plan (assuming that plan s eligibility rules are met). These changes also do not affect the vested retirement benefits of former Unisys employees, including retirees. Note: For active employees whose benefits are governed by collective bargaining agreements, benefit changes will be implemented consistent with the company s statutory and contractual obligations. What Will Continue Employees will continue to earn years of service for vesting purposes so you can still become vested in your accrued Pension Plan benefit as of December 31, 2006, once you have worked for Unisys for at least five years. Employees will continue to earn years of service in order to be eligible for certain early retirement subsidies under the Unisys Pension Plan this means more years of service could result in a more beneficial early retirement benefit. Employees who receive their retirement benefit under the retirement accumulation account formula of the Unisys Pension Plan will continue to receive interest credit. Additional Retirement Program Changes Unisys retirees and former employees entitled to deferred vested benefits are not affected by the retirement program changes. If you currently have non-qualified retirement benefits (for example, if your Pension Plan benefits are limited by the annual IRS compensation limit), they will also stop growing effective December 31, 2006. Any benefits earned up to December 31, 2006 will not be affected. Of course, employees must be vested at the time their employment ends to be eligible for a benefit from the defined benefit pension plans. Employees continue to earn service for vesting and early retirement eligibility/subsidies while employed at Unisys, even though future benefit accruals will have ended as of December 31, 2006. If you are affected by the change, you ll be notified of a new non-qualified Unisys Savings Plan feature that is being created for employees whose eligible earnings are over the annual IRS compensation limit. 3

If You re on Disability or Subject to a QDRO If you re currently on long-term disability and participating in the Pension Plan, Unisys will end the accrual of future pension benefits on December 31, 2006. Employees on long-term disability are not permitted to contribute to the Unisys Savings Plan. Eligible employees who are on short-term disability after 2006 may contribute to the Unisys Savings Plan while on short-term disability and will be eligible for the increased company-matching contribution effective January 1, 2007. If your Pension Plan benefits are subject to a Qualified Domestic Relations Order (QDRO), your alternate payee may also be affected by these Pension Plan changes. Five Things You Can Do Now Take advantage of the enhanced Unisys Savings Plan to plan for your retirement. To maximize your retirement savings, consider these actions: 1) Save regularly. Years of steady saving can help you reach long-term financial goals. 2) Make the most of the company-matching contribution. Contribute as much money as you think is appropriate (up to the IRS limit) to maximize the company-matching contribution. Think twice before leaving money on the table. 3) Take it to the limit. You re allowed to make before-tax Savings Plan contributions of up to 30 percent of eligible pay (subject to IRS limits of $15,000 for 2006). In addition, if you are age 50 or older on or before December 31, 2006, you can make a catch up contribution of an additional $5,000, for a total of $20,000 in 2006. 4) Allocate and diversify. Balance risk and reward by building a diversified portfolio that is appropriately allocated. Regularly review and update your selections when appropriate. 5) Learn more about retirement planning. Use the educational tools and resources available to you. Also seek advice from your personal financial, tax or legal advisors before taking action. 4

Enrolling is Easy If you are already enrolled in the Unisys Savings Plan, you do not have to do anything to benefit from the Savings Plan changes unless you want to increase the amount you are contributing. If you are not already enrolled as a participant, you need to decide whether or not to enroll. Enrollment takes about 15 minutes. All you need to do is go to the Fidelity NetBenefits Web site at http://netbenefits.fidelity.com available 24 hours a day, 7 days a week. You will need to select a User ID and Password and you are on your way. Or, you may call the Unisys Savings Plan at 1-800-600-4015, between 8:30 a.m. and midnight, Eastern Time, Monday through Friday (except New York Stock Exchange holidays), and a representative will assist you in enrolling. Hearing-impaired employees may call 1-800-847-0348 during the same days and hours. With a few easy steps, you ll choose how much to save and where you want to invest your money. And, if you change your mind later, it s easy to adjust your contribution amount or investment selections in the future. Although increased matching contributions will not be available until 2007, you don t need to wait until December 31, 2006 to take action to increase your savings for retirement (subject to IRS limits). Action can be taken now if you are participating in the Savings Plan. 5

Retirement Plan Basics This overview explains the types of benefits that different retirement plans offer, how the plans deliver those benefits, and how they are funded. There are two basic types of retirement plans: Defined Benefit Plans What is defined is the benefit or amount paid out at retirement The current Unisys Pension Plan is a defined benefit plan. This type of plan is designed to pay a specific benefit at retirement based on an actuarial-based formula that takes your pay, years of service with Unisys, and other factors into consideration. Benefits are generally paid as an annuity when you retire, provided you are vested at the time you leave Unisys. You generally become vested in (fully own) your accrued benefit after you complete five years of service with Unisys, or reach age 65 and are participating in the Plan while working for Unisys. DIFFERENCES BETWEEN PLANS Pension Plan (Defined Benefit) Benefits Formula-driven Payment Typically monthly at retirement Investment Risk Company (generally) Company Expense & Contributions Varies Savings Plan (Defined Contribution) Account-based Typically lump sum after termination of employment Employee More predictable Unisys pays the full cost of the Plan and generally assumes all of the investment risk, which means your monthly benefit generally will not be affected by fluctuations in the investment markets. You are not permitted to make any contributions or investment decisions. Unisys is required to follow certain rules and regulations under the Federal Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code, including the requirement to fund at specified levels. Each year, the Plan s assets and liabilities are reviewed by a specialist called an actuary who determines the contribution necessary to meet the government s minimum funding requirements. 6

Defined Contribution Plans What is defined is the amount contributed to the plan each year The current Unisys Savings Plan is one type of defined contribution plan. Benefits are account-based that is, they are determined based on contributions to an employee account and the associated investment returns (gains or losses). You and the company share in the cost of the Plan by regularly contributing a percentage of your eligible pay to your account. You must make contributions to receive a company-matching contribution, which is made in Unisys common stock. Because contributions are made on a regular basis, the funding of the Savings Plan is fairly predictable. SInce 1980, the percentage of private sector workers covered by defined benefit pensions has fallen from about 35 percent to under 20 percent. This means that individuals must shoulder more of the responsibility for saving for retirement not just in making contributions but also in the planning and making of investment decisions. You generally choose how your contributions are invested and you assume all of the investment risk. Your account balance will be directly affected by fluctuations in the value of investments in your account. Defined contribution plans are portable your Savings Plan account is generally paid and taxable when you leave Unisys. However, you can also choose to receive a monthly annuity at retirement or receive your account in periodic installments. You may also roll over your account balance directly to an eligible retirement plan that accepts such rollovers, or to a traditional individual retirement account or annuity (IRA). You are always 100 percent vested in your account, including the company-matching contributions part of your account. Plan differences: what they mean to you. With a defined benefit plan, such as the Unisys Pension Plan, the plan provides a benefit amount at retirement, based on a specified formula. In a defined contribution plan, such as the Unisys Savings Plan, your benefit at retirement depends upon the contributions you and the company make and the investment elections you make over the years. Your retirement benefit depends on how your Savings Plan account balance accumulates. So, in a Savings Plan, you have much more influence over the value of your retirement benefit. 7

Unisys Retirement Program: At a Glance UNISYS U.S. RETIREMENT PROGRAM THROUGH DECEMBER 31, 2006 Today, the Unisys U.S. retirement program enables you to plan for your retirement through these plans (assuming eligibility): 1. Unisys Savings Plan 2. Unisys Savings Plan Company Match 3. Unisys Pension Plan 4. Social Security (The Unisys Pension Plan does not apply to employees hired after June 30, 2005) The Unisys Savings Plan (a 401(k) plan) gives you the opportunity to defer your Federal taxable earnings while increasing your annual retirement savings by investing a percentage of your eligible pay on a beforetax basis (subject to IRS limits) through payroll deductions. You determine where you want your contributions to be invested within the available Plan funds. You assume the risk for any investment gains or losses. Your contributions are automatically 100 percent vested. Unisys matches 50 percent of the first four percent of eligible pay you save on a before-tax basis in the Unisys Savings Plan (subject to IRS limits). Matching contributions are in company common stock and are not eligible for diversification until you reach age 50. Company-matching contributions and any investment results are automatically 100 percent vested. You assume the risk for any investment gains or losses. Your Pension Plan accrued benefit grows each year you work for Unisys. You are entitled to the accrued benefit at early or normal retirement, provided you are vested (generally after five years of service). Unisys contributes the same amount as you do to Social Security. Contributions and benefits are based on formulas determined by the Federal Social Security Administration. If you were hired after December 31, 2002, your retirement accumulation account will accrue pay credits equal to four percent of eligible pay. Your account will also accrue interest. If you were hired before January 1, 2003, you would essentially be entitled to the better of your retirement accumulation account and the career average pay formula. 8

UNISYS U.S. RETIREMENT PROGRAM BEGINNING JANUARY 1, 2007 Beginning January 1, 2007, the Unisys U.S. retirement program will enable you to plan for your retirement in the following ways (assuming eligibility): 1. Unisys Savings Plan 2. Unisys Savings Plan Company Match 3. Unisys Pension Plan 4. Social Security (The Unisys Pension Plan does not apply to employees hired after June 30, 2005) The Unisys Savings Plan (a 401(k) plan) will still give you the opportunity to defer your Federal taxable earnings while increasing your annual retirement savings by investing a percentage of your eligible pay on a beforetax basis (subject to IRS limits) through payroll deductions. You ll determine where you want your contributions to be invested within the available Plan funds. You ll assume the risk for any investment gains or losses. Your contributions will automatically be 100 percent vested. Unisys will match 100 percent of the first six percent of eligible pay you save on a before-tax basis in the Unisys Savings Plan (subject to IRS limits). New matching contributions will be in company common stock and will be immediately eligible for diversification. Companymatching contributions and any investment results will automatically be 100 percent vested. You ll assume the risk for any investment gains or losses. Unisys will end the accrual of future benefits under the Pension Plan as of December 31, 2006. Your Pension Plan accrued benefit earned as of December 31, 2006 will not be affected. You must be vested (generally after five years of service) at early or normal retirement to be entitled to your accrued benefit. Retirement accumulation accounts will continue to receive interest credit. Unisys will contribute the same amount as you do to Social Security. Contributions and benefits are based on formulas determined by the Federal Social Security Administration. 9

On average, Americans spend 19 percent of their lives in retirement. Make the Most of the Savings Plan Now more than ever, it s important for you to learn about the Savings Plan and to decide whether to participate. It s never too early to start planning for retirement. In fact, the earlier you start participating, the better. There are many opportunities in the current Savings Plan for you to consider. The amount you receive from the Savings Plan when you retire will depend on your contributions and investment decisions. Contributing Can Earn You Money Employee contributions are an important part of retirement savings that s one reason why employers offer matching contributions. Unisys will be offering an enhanced company-matching contribution effective January 1, 2007. Unisys will increase the company-matching contribution for the Unisys Savings Plan for most participating employees from 50 percent of the first four percent of eligible pay you save on a before-tax basis (resulting in a maximum company match of two percent of eligible pay, subject to IRS limits), to a 100 percent match of the first six percent of eligible pay you save on a before-tax basis (subject to IRS limits), effective January 1, 2007. This is a potential maximum increase of four percent of eligible pay to the company match portion of your Savings Plan account. Your contributions are automatically deducted from your paycheck, and you can contribute on a before-tax basis. This means you reduce your current taxable income because you generally do not pay Federal and many state and local income taxes on Savings Plan contributions. Contributions and investment results build up tax free until withdrawn. You can actually lower the amount of current income taxes you pay. This could mean more money in your take-home pay compared to saving money in a traditional after-tax savings account. The Plan also permits you to contribute on an after-tax basis, but there is no company match if you elect this approach. Approximately 30 percent of eligible Unisys employees do not currently contribute to the Savings Plan and are missing the opportunity for the company s matching contribution. 10

Starting Early Can Make a Big Difference You may think that retirement is a long way off. However, starting to invest early in your working life gives you the potential to accumulate more money in your account than if you start later. The money earned by your Savings Plan investments stays in your account to earn even greater returns that s compounding. The earlier you start to contribute to your Savings Plan account, the greater the compounding power. Contributions and investment results build up tax free until withdrawn. There are e-learning and modeling/planning tools available on The Employee Network to help you visualize your retirement picture and make Savings Plan calculations. It s Not Too Late Your retirement may be approaching, and decisions you made in the past may have limited your contributions. You may not have had the money to invest because of other priorities (for example, mortgage, college tuitions, and so on), or you may not have made the best investment decisions. Well, it s never too late to get started or to increase your contributions (subject to IRS limits). And, if you are a participant at age 50 or expected to reach age 50 during the calendar year, and have contributed the maximum allowed under the Plan, you have a significant benefit opportunity to make additional before-tax catch-up contributions to your Unisys Savings Plan account, up to the IRS limit of $5,000 for 2006. Manage Your Account You have control over how your Savings Plan account is invested. It s just as important to actively manage your account as it is to participate. Like your health and your car, your Savings Plan strategy should be subject to routine inspection. With a variety of investment choices in the Unisys Savings Plan, you can select the choices that best match your investment strategy and your comfort with different levels of risk. Keep in mind, the value of your account will fluctuate over time. Seek Advice You are urged to contact your personal financial, tax or legal advisors before taking action. Unisys cannot give financial, tax or legal advice. Almost 58 percent of American workers have not calculated how much money they will need to save for retirement. 11

Example Current Savings Plan Here s an example of the power of compounding and what you can gain by contributing early. This example is for the current company-matching contribution. The results are based on the assumption that both employees: make $50,000 annually; contribute 6 percent of eligible pay on a before-tax basis to the Savings Plan annually (or $3,000); receive a company match of 2 percent of eligible pay (or $1,000); and earn a 6.5 percent annual return on their investment. (This assumption does not necessarily reflect future results, and the Plan does not guarantee any rate of return to participants.) Employee: John At age 30, John contributes $3,000 and the company match is $1,000 At retirement, John s $30,000 investment (with company match) 30 40 45 50 60 65 has grown to $269,057 John continues to contribute for 10 years and then stops making contributions. TOTAL INVESTMENT: (John + Unisys) = $40,000 Example Enhanced Savings Plan The next example is for the enhanced company-matching contribution that becomes effective January 1, 2007. The results are based on the assumption that both employees: make $50,000 annually; contribute 6 percent of eligible pay on a before-tax basis to the Savings Plan annually (or $3,000); receive a company match of 6 percent of eligible pay (or $3,000); and earn a 6.5 percent annual return on their investment. (This assumption does not necessarily reflect future results, and the Plan does not guarantee any rate of return to participants.) Employee: John At age 30, John contributes $3,000 and the company match is $3,000 At retirement, John s $30,000 investment (with company match) 30 40 45 50 60 65 has grown to $403,586 John continues to contribute for 10 years and then stops making contributions. TOTAL INVESTMENT: (John + Unisys) = $60,000 Employee: Sally At age 40, Sally contributes $3,000 and the company match is $1,000 At retirement, Sally s $75,000 investment (with company match) 35 40 45 50 60 65 has grown to $243,206 Sally continues to contribute for 25 years and then stops making contributions. TOTAL INVESTMENT: (Sally + Unisys) = $100,000 Although John contributed to the Savings Plan for 15 fewer years than Sally and invested $45,000 less, he accumulated $25,851 more than Sally simply because he started investing ten years earlier. Employee: Sally At age 40, Sally contributes $3,000 and the company match is $3,000 At retirement, Sally s $75,000 investment (with company match) 35 40 45 50 60 65 has grown to $364,809 Sally continues to contribute for 25 years and then stops making contributions. TOTAL INVESTMENT: (Sally + Unisys) = $150,000 Although John contributed to the Savings Plan for 15 fewer years than Sally and invested $45,000 less, he accumulated $38,777 more than Sally simply because he started investing ten years earlier. As you can see, you have a greater opportunity to build your account with the enhanced company-matching contribution. And, based on these hypothetical examples, you can see how important it is to start contributing to the Savings Plan now to make the most of your investments. The sooner you start, the better prepared you can be for retirement. 12

Saving for Retirement A Shared Responsibility The Unisys retirement program is built on the concept of shared responsibility between you and the company. Unisys is committed to providing more financial education and communication about retirement savings to better prepare you to make the savings decisions that are right for you. Over the next few months, the company will offer workshops and tools to help you with retirement income planning and investment. What s Coming Look for additional information in the coming months through: FAQ addendums Follow-up e-mail messages Personalized retirement benefit statement, mailed to your home Savings and investment planning workshops For Your Benefit newsletter features Getting Ready These changes aren t happening immediately, but it s a good idea to take the time now to understand how they ll impact your future retirement plans. If you have specific questions about how these changes will affect you, call the Pension Change Hotline at 1-800-340-4533. Call center representatives will be available from 9:00 a.m. to 6:00 p.m., Eastern Time, Monday through Friday (except New York Stock Exchange holidays). Hearingimpaired employees may reach the hotline at 1-800-695-1317 during the same days and hours. Since this is not a dedicated Unisys number, it s important that you identify yourself as a Unisys employee when calling. Please note: The above communication describes in a summary fashion or refers to changes to certain Unisys benefit plans, without going into all of the details. The provisions of the applicable plan documents solely determine the legal rights and obligations of any person. In the event of any discrepancy between this communication and the official plan documents, the applicable plan documents (including any amendments), as interpreted by the plan administrator, in his/her/its sole discretion, will always govern. Unisys reserves the right to amend or terminate any or all of its benefit plans, in whole or in part, at any time and for any reason to the extent permissible under applicable law. For active employees whose benefits are governed by collective bargaining agreements, benefit changes will be implemented consistent with the company s statutory and contractual obligations. This communication is for internal use only. It may contain confidential and/or otherwise proprietary material and is thus for use only by the intended recipient. If you received this in error, please contact the sender and delete the e-mail and its attachments from all computers. 2006 Unisys Corporation. All rights reserved. Unisys is a registered trademark of Unisys Corporation. All other brands and products referenced herein are acknowledged to be trademarks or registered trademarks of their respective holders. Printed 3/2006 13