STANCORP FINANCIAL GROUP INC

Defined Contribution Plans. The Standard 401(k) Plan is the Company’s tax qualified retirement savings plan pursuant to which its employees, including the NEOs, are able to make pre-tax contributions from their salary and short-term incentive compensation. The Company makes matching contributions for all participants each year equal to 100% of their elective deferrals up to 3% of their total salary and short-term incentive payout plus 50% of elective deferrals on the next 2% of their total salary and short-term incentive compensation. Employees not eligible for the pension plan are eligible for additional non-elective employer contributions under the 401(k) Plan equal to 2% to 6% (depending on years of service) of total salary and short-term incentive compensation. The Internal Revenue Code limits the amount of compensation that can be deferred, matched and supplemented under the 401(k) Plan. The Company also provides its Executive Officers with the opportunity to defer salary and short-term incentive compensation under our nonqualified Deferred Compensation Plan for Senior Officers, which is also an element of a competitive benefit package relative to executives in comparable positions at comparable insurance companies. We make matching contributions under this plan equal to 100% of elective deferrals up to 4% of excess salary and short-term incentive compensation, which is similar to the matching formula under the 401(k) Plan. The Company also makes supplemental contributions under this plan equal to the amounts that would have been contributed under the 401(k) plan formula if not for the tax law limits. Matching and supplemental contributions in 2015 for the NEOs under both plans are included under All Other Compensation in the “Summary Compensation Table.”

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for annual compensation over $1 million paid to their CEO and certain other highly compensated executive officers. The Internal Revenue Code generally excludes from the calculation of the $1 million cap compensation that is based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. Stock options and performance share awards under the Company’s 2002 Stock Incentive Plan are structured in a manner intended to qualify any compensation paid thereunder as “performance-based compensation” excluded from the calculation of the $1 million annual cap. In addition, the Company’s STIP is designed to qualify a portion of the annual incentive paid to each officer as “performance-based compensation” exempt from the $1 million cap. The 2015 STIP performance goals based on earnings per share, revenues, operating expenses, and return on equity all were intended to be the type of pre-established, objective performance goals that enable exclusion of the resulting compensation from the $1 million cap. These 162(m) qualified performance goals covered 80 percent of the annual incentive targets for each NEO in 2015. As a result of the O & C Committee’s various actions to qualify compensation as “performance based,” all of the compensation paid, in or for performance in 2015, to NEOs except for Mr. Ness was considered deductible under Section 162(m). A portion of the compensation paid, in or for performance in 2015, to Mr. Ness is nondeductible under Section 162(m).

The NEOs are eligible to participate in the Company’s Deferred Compensation Plan for Senior Officers (“DCP”). Participants in the DCP may elect in advance to defer from 2% to 50% of their total salary and STIP earned each year. The Company makes matching contributions following each year equal to the lesser of (a) 100% of the participant’s salary and STIP deferred for the year, or (b) 4% of the participant’s total salary and STIP for the year in excess of the limit under §401(a)(17) of the Internal Revenue Code (limit was $265,000 for 2015). Elective and matching contributions are fully vested at all times. For DCP participants who were hired after January 1, 2003 and therefore are not eligible to participate in the Pension Plan and SRP, the Company makes supplemental contributions following each year equal to a percentage of the participant’s total salary and STIP for the year in excess of the limit under §401(a)(17) of the Internal Revenue Code. The supplemental contribution percentage is initially 2%, and increases to 3% after five years of service, 4% after 10 years of service, 5% after 15 years of service, and 6% after 20 years of service. Supplemental contributions are fully vested after three years of service. Mr. Chadee and Ms. Durham are the only NEOs who receive supplemental contributions.

As of December 31, 2015, each NEO held options to purchase the Company’s common stock as listed in the Outstanding Equity Awards table above. Under the terms of their stock option agreements for options issued in 2008 or earlier, upon the death, disability or retirement of the officer, unexercisable options become fully exercisable and the standard 90-day period for exercising options following termination of employment is extended to five years (two years for the option granted to Mr. Ness in September 2008), but not beyond each option’s original 10-year term. For options granted after 2008, vesting accelerates only upon death or disability (not retirement) and the optionee has a maximum remaining term of two years following termination of employment, but not beyond each option’s original 10-year term, in which to exercise. If death or disability of a NEO had occurred on December 31, 2015, the sum of (i) for outstanding unexercisable options, the aggregate value as of December 31, 2015 of those options, assuming a two-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used for valuing options in Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 3—Share-Based Compensation—Option Grants” plus (ii) for outstanding exercisable options, the increase in value of those options resulting from the extension of the post-termination exercise period from 90 days to two years or five years, as applicable, with the option values as of December 31, 2015 for 90-day, two-year and five-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used for valuing options in Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 3—Share-Based Compensation—Option Grants”, for each of the following NEOs was: Mr. Ness, $3,369,994; Mr. Chadee, $591,582; Ms. Durham, $346,248; Mr. Hibbs, $731,834; and Mr. McMillan, $529,492. Mr. Ness was the only NEO eligible for retirement as of December 31, 2015. If Mr. Ness had retired on December 31, 2015, the increase in value of his outstanding exercisable options resulting from the extension of the post-termination exercise period from 90 days to two years or five years, as applicable, with the option values as of December 31, 2015 for 90-day, two-year and five-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used for valuing options in Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 3—Share-Based Compensation—Option Grants,” would have been $22,413.

As described in footnote 2 to the Grants of Plan-Based Awards table, the Company granted performance share awards to the NEOs in February 2015 under which shares of the Company’s common stock will be issued based on the Company’s performance from 2015 to 2017. Similar awards were granted in February 2014 under which shares will be issued based on the Company’s performance from 2014 to 2016. The award agreements generally require the Executive Officer to be employed by the Company on the last day of the performance period to receive an award payout. However, if an officer’s employment terminates earlier as a result of death, disability or retirement, the former officer will be entitled to a pro-rated payout based on the portion of the performance period elapsed prior to employment termination. Accordingly, if any NEO had terminated employment on December 31, 2015 as a result of death, disability or retirement, the NEO would have received payouts based on 2014-2016 and 2015-2017 performance after the end of those periods based on the Company’s actual performance against the performance goals, with the payout based on 2014-2016 performance calculated using two-thirds of the target number of the performance shares and the payout based on 2015-2017 performance calculated using one-third of the target number of the performance shares. Assuming achievement of target performance levels in 2014-2016 and 2015-2017, the estimated total value of the two award payouts, based on a stock price of $113.88 per share, for each NEO would be: Mr. Ness, $2,097,599; Mr. Chadee, $604,869; Ms. Durham, $189,763; Mr. Hibbs, $405,758; and Mr. McMillan, $538,776.