Defined Contribution Plan

The Company offers a defined contribution retirement benefit plan, the Ryan Specialty Group Employee Savings Plan (the “Plan”), to all eligible employees, based on a minimum number of service hours in a year. Under the Plan, eligible employees may contribute a percentage of their compensation, subject to certain limitations. Further, the Plan authorizes the Company to make a discretionary matching contribution, which has historically equaled 50% of each eligible employee’s contribution. The Company recognized expense related to discretionary matching contributions in the amount of $14.8 million, $10.4 million and $8.1 million in the years ended December 31, 2021, 2020 and 2019, respectively. Starting in 2021, the Company changed the timing of discretionary matching contributions to being made throughout the year as opposed to making the contribution after the end of each year. The Company accrues for employer contributions in Current Accrued compensation within the Consolidated Balance Sheets. Due to the change in timing of the discretionary matching contributions, there were no Company contributions accrued for as of December 31, 2021. As of December 31, 2020, the Company accrued for $10.4 million of Company contributions which were paid in the first quarter of 2021.

Deferred Compensation Plan

The Company offers a non-qualified deferred compensation plan to certain senior employees and members of management. Under this plan, amounts deferred remain assets of the Company and are subject to the claims of the Company’s creditors in the event of insolvency. Amounts deferred are not invested in any funds. However, the liability balance is updated to reflect hypothetical interest, earnings, appreciation, losses and depreciation that would be accrued or realized if the deferred compensation amounts had been invested in the applicable benchmark investments. Changes in value on deferred amounts held are recognized within Compensation and benefits in the Consolidated Statements of Income and Non-current Accrued compensation in the Consolidated Balance Sheets. The Company recognized a liability for employee deferrals, inclusive of changes in the value of deferred amounts held, of $4.2 million and $1.5 million as of December 31, 2021 and 2020, respectively.

Employee Incentives

Employee Retention Incentives

In connection with the acquisition of businesses and recruiting and retaining key talent, in 2020 the Company began issuing retention incentives with a claw back feature to employees. Retention incentives are recognized as Prepaid incentives - net within the Consolidated Balance Sheets. The expense associated with the earned portion of the prepaid incentives is recorded as Compensation and benefits within the Consolidated Statements of Income over the service period, which is consistent with the term of the arrangements. The aggregate balance of these retention incentives was $1.9 million and $1.7 million as of December 31, 2021 and 2020, respectively. The compensation expense related to these incentives was $0.8 million and $0.2 million as of December 31, 2021 and 2020, respectively. The average term of these incentives was 3.9 years as of December 31, 2021.

Forgivable Notes

Historically the Company offered forgivable notes to certain employees as an incentive, whereby the principal amount of forgivable notes and accrued interest is forgiven by the Company over the term of the notes, so long as the employee continues employment with Ryan Specialty and complies with certain contractual requirements. These notes were structured as recourse loans and contain non-solicit clauses and have terms that are between three and ten years. In the event of an employee’s termination, whether voluntary or involuntary, the employee must repay the unpaid, unforgiven note balance at termination. The Company has a policy of enforcing the provisions of the unforgiven portion of the forgivable note agreements by pursuing collection through third-party collection agencies and taking legal action.

The aggregate balance of forgivable notes was $31.2 million and $43.3 million as of December 31, 2021 and 2020, respectively. This balance is included within Current and Non-current Prepaid incentives - net in the Company’s Consolidated Balance Sheets. The amortization expense associated with the forgiveness of the principal amount of the notes and accrued interest is recorded within Compensation and benefits within the Consolidated Statements of Income over the related service periods, which is consistent with the term of the notes. Interest income on the forgivable notes was $0.9 million, $1.3 million and $1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. Amortization expense net of interest on the forgivable notes was $7.2 million, $8.6 million and $9.7 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of the end of 2020, the Company no longer issues forgivable notes as employee incentives.

The Company also historically provided incentives in the form of forgivable notes to certain employees if contractual revenue thresholds were achieved as outlined in employee or other incentive agreements. In 2020, the Company discontinued this retention incentive and settled the remaining obligation. As a result, the Company incurred $5.3 million of expense that was recognized in Compensation and benefits in the Consolidated Statements of Income as of December 31, 2020.

The weighted-average interest rate on outstanding forgivable notes was 2.4% and 2.4% as of December 31, 2021 and 2020, respectively.

Long-Term Incentive Compensation Agreements

The Company has entered into certain long-term incentive agreements whereby, at the end of a service period, employees are awarded cash, according to specified formulas following a period, typically associated with an

acquisition. The Company recognizes expense within Compensation and benefits in the Consolidated Statements of Income over the service period of these awards based on the estimated expected payout. The Company recognized compensation expense of $1.8 million, $1.8 million and $0.9 million related to these awards for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, $5.2 million and $0.2 million related to such agreements was included within Current Accrued compensation and Non-current Accrued compensation, respectively, in the Consolidated Balance Sheets. As of December 31, 2020, $4.6 million and $3.9 million related to such agreements was included in Current Accrued compensation and Non-current Accrued compensation, respectively, in the Consolidated Balance Sheets. The aggregate amount of maximum obligation payable was $6.9 million as of December 31, 2021.

All Risks Long-Term Incentive Plans

ARL had established various long-term incentive plans (“LTIPs”) throughout its history to incentivize certain executives, producers and key employees. ARL additionally established sales bonuses, implemented by the management of ARL, as compensation for past services performed in connection with executing the sale. The LTIP awards vest based on the achievement of various service conditions and are cash-settled. Subsequent to the acquisition, cash settlements will be made by the Company. The $328.0 million total value related to sales bonuses and LTIP awards at the acquisition date was $24.3 million and $303.7 million, respectively. The portion allocated to the pre-combination service period and accounted for as consideration transferred was $257.6 million inclusive of sales bonuses, of which $114.7 million was paid at close. The total future estimated LTIP expense at the acquisition date was $70.4 million.

On August 10, 2021, the Company's Board of Directors elected to terminate the ARL long-term incentive plans. The decision to terminate the plans did not change the value of, or entitlements to, any benefits thereunder. The benefits accruing under these plans are required to be paid within twelve months of the termination date subject to participants meeting service conditions.

Of the expense related to post-combination services after forfeitures of $2.2 million, the Company recognized $36.6 million and $11.3 million related to these awards for the years ended December 31, 2021 and 2020, respectively, with the remaining expense of $20.4 million to be recognized in 2022. The expense is recognized in Compensation and benefits in the Consolidated Statements of Income. The Company made cash payments of $99.7 million and $114.7 million for the years ended December 31, 2021 and 2020, respectively, with the remaining balance of $111.4 million to be paid in 2022. The ARL LTIP accrual was $91.0 million and $154.2 million as of December 31, 2021 and 2020, respectively. The current year liability for these awards is recognized in Current Accrued compensation in the Consolidated Balance Sheets. The prior year liability was recognized in both Current Accrued compensation and Non-current Accrued compensation in the Consolidated Balance Sheets.