Filed within this Form 10-K

The Federal Home Loan Bank of Boston (i.e., the "Bank") has an established incentive compensation plan for the Chief Audit Officer (CAO). This Plan is intended to compensate the CAO in a manner that recognizes the importance of individual performance through metrics linked to his principal functions.

The Audit Committee of the Bank’s Board of Directors (Audit Committee) will determine participation in the Plan.

    

Criteria for determining whether an award will be payable to the CAO are based upon the goals outlined in Appendix A. The Audit Committee is responsible for setting goals, measuring their achievement, and determining the incentive payment.

Each goal will operate independently of the others.

The CAO will be assigned an incentive award opportunity that combines short and long-term incentives and is expressed as a percentage of the incumbent’s base salary at year-end 2020, as illustrated in the chart below.

Goal achievement and individual awards for the goals as outlined in Appendix A will be calculated at the conclusion of 2020 based on results as of December 31, 2020. The CAO will be eligible to receive sixty (60) percent of such award in a cash payment, subject to the final approval of the Audit Committee, and if required, the review of the Federal Housing Finance Agency (FHFA), between March 1 and March 15, 2021. Except as otherwise described under CAO ICP Administration, the CAO must be employed by the Bank on the date of payment of the award to receive the award.

The chart below illustrates the Threshold, Target, and Excess payout potentials for this short-term award.

The CAO will be eligible to receive the remaining forty (40) percent of the award opportunity as cash between March 1 and March 15, 2023. Annually, the Audit Committee would determine the CAO’s level of achievement with the annual CAO ICP.

The chart below illustrates the Threshold, Target, and Excess payout potentials for the long-term award described above.

Goal achievement and individual awards for the long-term opportunity will be determined at the conclusion of 2022 based on results of the following two long-term goals as of December 31, 2022.

This goal will be measured by the Audit Committee’s evaluation of the performance of the Chief Audit Officer (CAO) and the Internal Audit Department in its efforts to provide quality internal audit services and value to the Audit Committee and the Bank; and in implementing the projects in the Internal Audit Strategic Plan (IASP); and the efforts of continuous improvement of Internal Audit processes and reporting. Topics for the Audit Committee’s consideration include Internal Audit’s performance over the period, the extent and quality of IASP projects implemented and the implementation of continuous improvement efforts that may or may not be identified in the Internal Audit Strategic Plan (e.g. developing a plan for using data analytics and implementing data analytics as part of IA procedures, updating summary reporting for the Audit Committee and management; identifying and addressing evolving risks and/or regulatory issues; etc.). The Audit Committee may also assess the opportunities where Internal Audit has tried to add value to Bank business processes via process improvement

recommendations and regular interaction with Bank management as part of Bank committee involvement and special project contributions.

This goal will be measured by the achievement of targeted regulatory goals by December 31, 2022.

Threshold:     the Audit Committee in conference with the Board may grant an award equal to fifty (50) percent of the Target award set forth below if the Bank achieves an overall rating of [^^^] on the 2022 Report of Examination (ROE), but more than [^^^] subcomponents deteriorate between the 2019 ROE and the 2022 ROE.

Target:    the Target award will be earned if the Bank receives an overall rating of [^^^] on the 2022 Report of Examination (ROE), and no more than [^^^] subcomponents deteriorate between the 2019 ROE and the 2022 ROE.

Excess:    the Audit Committee in conference with the Board may grant an award equal to one hundred fifty (150) percent of the Target award if the Bank achieves an overall rating of [^^^] on the 2022 ROE and [^^^] subcomponents improve from 2019 to 2022, or if the Bank receives an overall rating of [^^^] on the 2022 ROE.

Participants will be eligible to receive the long-term award opportunity as cash between March 1 and March 15, 2023, as follows:

Threshold: An award equal to 50 percent of the remaining 40 percent of the combined award opportunity

Target:        An award equal to 100 percent of the remaining 40 percent of the combined award opportunity

Excess:     An award equal to 150 percent of the remaining 40 percent of the combined award opportunity

In addition, the following conditions must be satisfied for participants to receive the long-term award opportunity:

•The participant is in employment with the Bank on the payment date, as described below in CAO ICP Administration, and

•Subject to the discretion of the Audit Committee in conference with the Board, the long-term award calculated above may be reduced, (but not to a number that is less than zero) for participant, as applicable, if, during calendar years 2021 and/or 2022, any of the following occur such that if it had occurred prior to the year-end 2020 calculations, it would have negatively impacted the goal results and reduced the associated payout calculation:

i.operational errors or omissions resulting in material revisions to (A) the 2020 financial results, (B) information submitted to FHFA supporting

the goal results or payout calculation, or (C) other data used to determine the combined award at year-end 2020;

ii.submission of significant information to the SEC, Office of Finance and/or FHFA materially beyond any deadline or applicable grace period, other than late submissions that are caused by acts of God or other events beyond the reasonable control of the participants, or

iii.failure by the Bank to make sufficient progress, as determined by the FHFA, in the timely remediation of examination and other supervisory findings relevant to the goal results or payout calculation.

•All long-term award payouts shall be subject to the final approval of the Audit Committee and review and non-objection by the FHFA (to the extent required by FHFA).

The CAO ICP is administered by the Audit Committee of the Board of Directors which shall have full power and binding authority to construe, interpret, and administer the CAO ICP, and to adjust it for extraordinary circumstances.

Extraordinary circumstances may include changes in Bank business, Bank strategy, Internal Audit strategy, Internal Audit department structure, termination or commencement of business lines, impact of severe economic fluctuations, significant growth or consolidation of the membership base, or significant regulatory or other changes impacting the Internal Audit Department, Bank or Bank System.

The Audit Committee reserves the right at any time to amend, suspend or terminate the CAO ICP in whole or in part, for any reason, and without the consent of any CAO ICP participant but will not do so without re-submission to FHFA, if required.

CAO ICP awards shall not be considered earned or payable, in whole or in part, to any participant for any reason until they are finally determined by the Audit Committee following the end of the plan years and following the non-objection of the FHFA (to the extent required by the FHFA).

Participants must receive a performance rating of “Meets Expectations” or better for 2020 in order to be eligible to receive an IAICP payout.

Any individual hired or promoted into an eligible position during 2020 that is granted an award shall have any such incentive award prorated based on actual base salary paid during the plan year, providing he/she has served a minimum of three months in that role in 2020 and otherwise satisfies the CAO ICP’s requirements.

If an individual becomes a participant of the CAO ICP during the plan year, e.g. due to a job change or promotion, then any CAO ICP award will be prorated based on months in the CAO ICP, provided he/she serves a minimum of three months in the CAO ICP and otherwise satisfies the plan's requirements.

Except as described below, any CAO ICP participant who terminates employment for any reason, whether voluntarily or involuntarily, before the applicable award payment date

will not be entitled to any award, except as otherwise determined by the Audit Committee, at their sole discretion and subject to review of the FHFA, if required1.

•CAO ICP participants who terminate employment with the Bank by reason of death or disability or who are eligible to retire2 from employment with the Bank prior to the March 2021short-term award payment date may receive a pro rata payment of the sixty-(60) percent short-term incentive opportunity as determined by the Audit Committee and at their sole discretion and subject to the review of the FHFA, if required, based on the months of completed service as an CAO ICP participant during 2020. To be eligible, the participant must complete at least six months of service in 2020and otherwise satisfy the CAO ICP’s requirements. Participants who die, become disabled, or retire during 2020 will not be eligible for any long-term incentive award.

•CAO ICP participants who terminate employment with the Bank by reason of death or disability prior to the long-term award payment date in March 2023, or who terminate prior to the long-term award payment date and are eligible to retire from employment with the Bank, may become eligible to receive payment of the forty (40) percent long-term incentive opportunity, subject to the granting of awards based on 2022 year-end results described above, with the approval of the Audit Committee and at their sole discretion, and subject to the review of the FHFA, if required.

Awards to retiring or disabled participants or beneficiaries will be paid at the same time as awards to all active participants. Beneficiary means the participant’s (i) surviving spouse; or (ii) duly appointed and qualified executor or personal representative or estate. The Administrator may permit participants to designate other persons as beneficiaries, but no designation of a beneficiary shall be effective unless made in accordance with the procedure specified by the Administrator and actually received by the Administrator prior to the participant’s death.

The Bank may make such provisions, as it deems appropriate, for withholding payroll taxes in connection with payment of CAO ICP awards.    

1 Where the CAO ICP refers to the participant's termination of employment for purposes of receiving any payment, whether such a termination has occurred will be determined in accordance with Section 409A of the Internal Revenue Code and applicable regulations thereunder.

2 Eligibility to retire is defined as employees who are i) eligible for normal retirement as defined in the Pentegra Defined Benefit Plan for Financial Institutions or ii) meet the Rule of 70 as defined in the Pentegra Defined Benefit Plan for Financial Institutions, including credited service in the FHLB system, but excluding any other credited service at another Pentegra participating employer.

        

This metric is to ensure that the 2020 Internal Audit Plan (Plan) is completed as approved by the Audit Committee (AC). The CAO shall furnish the Committee with periodic reports on the status of the Plan. This report will indicate which audits and other activities have been completed, are in process, and those set to begin. The Audit Committee reserves the right to replace audits/activities for anticipated Audits, Information System implementations, and other Bank initiatives that are not implemented by Bank management as anticipated. In addition, the Committee reserves the right to amend/modify the Plan during the year as deemed necessary.

Threshold: Complete all Extreme, Significant and Moderate-Risk Audits and required audits, as contained in the 2020 Audit Plan, as amended.

Target: Complete audits with expected issuance dates by December 31, 2020 from the approved 2020 Audit Plan, as amended, and within 8% of budgeted hours as amended. Amendments to the delivery dates of the audits will be presented to and approved by the Audit Committee. Changes to budgeted hours will be based on changes in expected audit scope and unforeseen circumstances. Budget changes will be approved by the CAO and presented to the Audit Committee. The remaining 2020

audit plan audits are expected to be issued in Q1 2021 within 8% of budgeted hours, as amended.

Excess: Target plus provide to Bank Management value added services as part of an audit or review on the audit plan or as part of separate requests from Management. Value-added services could be in the form of ad-hoc advice upon request, input on processes/controls upon request (not within an audit/review e.g. advice on how to address exam items), providing information to business that will benefit business processes. (Measurement: Staff to provide summary of value- added services to the CAO and Internal Audit management, as applicable, with documentation from Management. Feedback from results of the annual questionnaire from Management will also be considered.)

Confirm that the Audit Committee can certify to the Board of Directors at the end of the fiscal year that it has fulfilled its responsibilities as outlined in its Charter, met the requirements of applicable FHFA regulations (Sect. 1232), those required by the Sarbanes-Oxley Act, and the Accounting Guidance items applicable to internal audit activities issued by the FHFA.

•Update the charters of the Audit Committee, the CAO, and the Internal Audit Department reflect any new requirements to ensure that the charters comply with regulatory requirements and include best practices.

•Provide periodic updates on how the Audit Committee is meeting its responsibilities.

•Assist the Committee in the evaluation of the external auditor and, as necessary, assist the Committee in the External Audit Request for Proposal Process. This support includes coordinating with the FHLB system Chief Audit Executives, the Audit Committee Chairman and the Audit Committee Chairmen’s Group to address initiatives at the FHLB system level.

•Threshold plus: Certify to the Audit Committee that it complies with all applicable requirements. Ensure that the Audit Committee complies with all FHFA Regulations and the best practice provisions of corporate governance as outlined in the Sarbanes-Oxley Act. This will enable the Audit Committee to certify to the Board of Directors that it has fulfilled its responsibilities.

•Conduct an appraisal of Audit Committee effectiveness by means of a self-assessment guide that measures key principles and practices. The survey will be completed in the fall (Oct/Nov) to measure progress in achieving committee effectiveness.

•Coordinate and present orientation materials that provide an overview of the Audit Committee and Internal Audit for new members of the Board of Directors and the Audit Committee and provide ongoing education opportunities for Committee members. Coordinate new Audit Committee member orientation and ongoing education opportunities for committee members.

Excess: Not Applicable to this goal.

Ensure timely IA review that 2019 FHFA examination findings have been remediated. As information is provided to IA from Bank management, the receipt of information will be logged, an internal audit staff member will review the materials, and an email will be sent acknowledging the receipt of the materials within 10 business days.

Testing to document remediation will be completed and the results communicated to Bank management within 30 business days of the receipt of the final documentation. Should additional information be required before testing can be completed, IA will communicate such to Bank management. This measurement will not consider the timing of sustainability testing that may be scheduled to occur after the target date. (i.e. after enough time has elapsed to test a sample of required activities, e.g. month-end reconciliations, Committee/board meetings, etc.)

Threshold: Adherence to the timelines for [^^^] examination findings communicated by management to Internal Audit that the remediation plans have been completed and no repeat FHFA examination comments based on insufficient Internal Audit testing of management remediation efforts.

Target: Adherence to the timelines for [^^^] examination findings and no repeat FHFA examination comments based on insufficient Internal Audit testing of management remediation efforts.

Excess: Target plus completion of remediation testing and results communication to Bank Management within 15 business days of receipt of the final documentation from Bank Management (does not include findings with IA as responsible party). Full excess will be reached if [

^^^] 2019 FHFA findings for the Bank’s exam and are remediated and communicated to Bank Management within 15 business days of receipt of the final documentation from Bank Management. A pro-rated portion award between Target and Excess will be awarded for the percentage of the findings meeting this measure (e.g. if remediation and communication occurs within 15 business days for [^^^] of the [^^^] - 2019 FHFA examination findings, then the award will be Target plus 57% of the Excess award.

Note: If significant changes to the timing of remediation action completion dates are implemented, the CAE will inform the Committee for consideration of either measuring or modifying this goal.

Effective communication and dialogue between the CAO, the Chief Executive Officer, and senior management.

The Audit Committee will monitor this metric during the year at regularly scheduled quarterly meeting and at year-end through discussions with the CAO and CEO.

Through the use of a questionnaire, the CAO will solicit feedback from Bank staff on their interaction with the CAO and Internal Audit staff on areas such as communication, administration, and partnering activities that occurred from December 2019 and during the

2020. The survey results will be anonymous and reported independently by HR to the Chair of the Audit Committee.

The Audit Committee is responsible for the measurement of this metric and will take into consideration interaction between the CAO and Bank management for this goal.

Threshold: Annual Questionnaire results indicate neutral (“2.5 – 2.2”) overall results and confirmation from management that communications with the CAO have been two or less times a year. (Score results are on a 5-point scale, 1 is the highest rating and 5 is the lowest rating.)

Target: Annual Questionnaire results indicate good (“>2.2 – 1.60”) overall results and confirmation from management that update meetings with the CAO have been three times a year and dialogue is cooperative.

Excess: Annual Questionnaire results indicate excellent (“>1.60”) overall results and confirmation from management that communications with the CAO have been more frequent than three times a year and include dialogue is collaborative to improve the audit process and interaction (e.g. work to improve SOX process/controls, collaborate with ERM on approach to viewing risk, coordinate with Management to discuss systems implementations, improve SOAF reporting, etc.).

Threshold: Cross-train IT staff and split responsibilities on ITGC SOX testing, as possible with work environment limitations.

Target: Organize ITGC SOX quarterly testing to occur during first 6 weeks of quarter only and deliver results memo within 2 weeks after obtaining needed documentation from IT/IS staff related to identified findings. Incorporate 2020 changed controls and modify testing. Incorporate access review source testing into SOX testing.

Excess: Target plus: Reduce overall hours to 250

per quarter (Note: This goal may need to be adjusted in the quarters after the JML project goes live.)

Threshold: Have staff create swim lane flowcharts (cross-functional flowcharts) for at least one sub-process for 8 audits: 4 by 5/31/2020 and another 4 by 9/30/2020.

Target: Threshold plus: Have staff to perform data analysis as part of audit planning, as agreed upon with the Chief Audit Officer, to enhance risk assessment process based on certain data characteristics (e.g. magnitude of the transactions, volume of activity, level of automation, fluctuations over a comparative period). In addition, incorporate data analysis into audit reporting, as applicable.

Excess: Target plus have staff create swim lane flowcharts (cross-functional flowcharts) for another four sub-processes by 10/31/2020.

3.Enhance IA processes and practices. To modernize IA electronic records management and storage (7%).

Threshold: Transition key IA files from the IA shared drives to the IA SharePoint site by July 31, 2020.

Target: Threshold plus organize and update the IA Audit Manual components on SharePoint by September 30, 2020.

Excess: Target plus review all shared drive files and prepare a plan to transition to SharePoint all needed files/records and discard unneeded by November 30, 2020. Goal

4.Maintain IAD staff professional certifications by obtaining relevant and appropriate CPE in their core and secondary competencies. This may include obtaining competencies in new or changed Bank business initiatives or processes. Identify areas where the IA team need to improve skills/knowledge and provide staff opportunities to further develop their skills via interaction with third party resources (e.g. subject matter experts from accounting firms and or other FHLBanks), targeted training and/or via achieving further professional certifications). (4%)

Threshold: Internal Audit professional staff (not including administrative staff) obtain on average 40 hours or applicable professional training support of professional certifications and building audit and/or Bank-specific skills and/or knowledge.

Target: Threshold plus identify what skills the team needs more depth in and work with IA team members to include those skills in the IA team member training plans. e.g. A) engage third-party resources to work with Internal Audit staff to provide subject matter expertise to internal audit work and to help build subject matter knowledge and experience with Internal Audit staff (e.g. engage third party resources to provide expertise in key areas such as IT, IS, Treasury, Risk Management). B) Engage third-party resources to develop and deliver Bank specific training for the IA team to further staff skills and improve on the effectiveness of the related audits.

Excess: Target, plus attainment of two audit related professional certifications (e.g. CIA, CIDA, CFSA, CISA, etc.) among all Internal Audit staff.

Completion Date: November 30, 2020