C i t y o f NL o s A n g e l e s D e f e r r e d C o m p e n s a t i o n P l a n. ews

Transcription

1 C i t y o f NL o s A n g e l e s D e f e r r e d C o m p e n s a t i o n P l a n ews Bulletin invest in your dreams SM Board of Deferred Compensation Administration Members: Margaret M. Whelan Chairperson, General Manager Personnel Department Bill Stein Vice Chairperson, Retired Participant Representative Eugene Canzano DWP Retirement Joya C. De Foor City Treasurer Don Keith Fire/Police Pension Richard Kraus Organized Labor Representative Shelley Smith Chairperson, City Employees Retirement System New Mid-Cap Fund Added to City Lineup The Board of Deferred Compensation Administration is pleased to announce the addition of a core mid-cap fund to the Deferred Compensation Plan investment menu. Midcap funds, which invest in stocks of medium-sized U.S. companies, provide an opportunity for stock investors to further diversify beyond large-company, small-company and international stocks. The City s mid-cap fund will be managed by Lazard Asset Management, LLC. The Board selected Lazard after engaging in a comprehensive search for a mid-cap provider. The firm, which has approximately $84 billion in assets under management in both public and private funds, demonstrated a strong record of performance consistent with reasonable investment management expenses. The fund is a mid-cap blend (meaning it invests in both growth and value-oriented stocks) that seeks to generate strong relative returns over a long-term time horizon by investing in financially productive companies at attractive valuations. The fund typically invests in 50 to 70 securities, with a market capitalization between $1 billion and $10 billion. The annual investment management fee is 0.93% with a rebate of 0.10%, for a net cost of 0.83%. The fund was introduced on October 2, More information can be found on the Plan Web site at 1 Expanded Direct Deposit Capabilities for Retirees Great-West Retirement Services is pleased to announce the extension of direct deposit (also known as electronic funds transfer (EFT) or ACH deposit) for partial and full distributions. Previously, direct deposit was only available for periodic payments. This service will give you the option of having your one-time payment deposited directly to your checking or savings account for an additional charge of $15 per withdrawal from your 457 account. You can avoid the extra charge by receiving the payment by check. Direct deposit for periodic payments continues to be offered without any additional charge. October 2006 Have Questions? Need Information? For information about the Plan and/or access to your account, contact Great-West Retirement Services in any of the following ways. Web site: 1 KeyTalk : 1 (888) City Hall 200 N. Spring Street, Room 867 Office hours: 8:30 a.m. to 5:00 p.m. DWP JFB Main Office Building 111 N. Hope Street, Level A area Office hours: First and third Tuesday of each month, usually from 8:30 a.m. to 2:00 p.m. Van Nuys City Hall Marvin Braude Constituent Center Conference Room 2B 6262 Van Nuys Boulevard Office hours: December 14, 2006, from 10:00 a.m. to 2:00 p.m. LAX Airport Generally, the third Wednesday of every month. Call the local service center to confirm locations and times for office hours. For information about the Board, decisions made by the Plan and investment selection, contact: Steven Montagna, Program Manager smontagna@per.lacity.org or (213) The Board s Web site: Main%20Page.htm 1 Access to KeyTalk and the Web site may be limited or unavailable during periods of peak demand, market volatility, systems upgrades/maintenance or other reasons. Transfer requests made via the Web site or KeyTalk received on business days prior to close of the New York Stock Exchange (1:00 p.m. Pacific Time or earlier on some holidays or other special circumstances) will be initiated at the close of business the same day the request was received. The actual effective date of your transaction may vary depending on the investment option selected. If you don t have a PIN, call the service center and press 0 during business hours and you will be directed to a representative in our National Service Center.

2 Fund Focus Each quarter we highlight two funds that are available in the Plan. Additional information is available through the Web site. If you don t have Web access, you may request the information via mail or by calling KeyTalk and speaking with a local representative. 1 Hartford Capital Appreciation HLS Inception: April 1984 Objective The Hartford Capital Appreciation HLS seeks capital growth. The account invests primarily in equity securities. Management seeks, through fundamental analysis, to identify companies it judges to have substantial near-term capital appreciation potential. The account selects stocks of all sizes based on dynamic earnings growth potential; larger companies are selected based on the expectation of a catalyst event. Who Might Choose This Investment? This investment may be most appropriate for someone seeking higher potential returns over time and who is willing to weather market downturns. Mid-cap stocks may be more volatile than large-cap stocks but with potentially higher returns. Portfolio Information as of September 30, 2006 This information is unaudited. Current or future holdings may change. Total Net Assets Operating Expenses $13.8 billion 0.59% Asset Allocation Equities 99.0% Cash 1.0 Diversification Information Technology 18.0% Financials 16.0 Industrials 13.0 Health care 13.0 Energy 12.0 Consumer Discretionary 11.0 Materials 9.0 Telecomm Services 5.0 Consumer Staples 3.0 Top 10 Holdings General Electric Co. 2.6% AT&T 2.4 Toyota Motor Corp. 2.3 Capital One Financial 2.2 Lockheed Martin Corp. 2.2 Walt Disney Corp. 2.2 XTO Energy 2.1 Medtronic 2.0 Federated Dept. Stores 2.0 Wellpoint Health 1.9 FUNDS ARE NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE. Although data is gathered from reliable sources, we cannot guarantee the completeness or accuracy of the data shown. Hartford Advisers HLS Inception: March 1983 Objective The Hartford Advisers HLS seeks long-term total return. The account invests in a mix of equities, debt securities and money market instruments. Assets are allocated gradually among the asset classes based on management s view of the economy and valuations of the market sectors. Management bases its asset allocation decisions on fundamental analysis and does not attempt to make short-term market timing decisions. Who Might Choose This Investment? This investment may be most appropriate for someone seeking a balance between income from bond investments and capital growth from equity investments in one option. The investor is willing to accept higher risk for greater potential returns than bond investing alone. Portfolio Information as of September 30, 2006 This information is unaudited. Current or future holdings may change. Total Net Assets Operating Expenses $8.84 billion 0.57% Asset Allocation Equities 65.0% Bonds 34.0 Cash 1.0 Diversification Information Technology 18.0% Financials 17.0 Healthcare 17.0 Consumer Discretionary 12.0 Industrials 10.0 Energy 7.0 Telecomm Services 6.0 Materials 6.0 Consumer Staples 5.0 Utilities 2.0 Top 10 Holdings General Electric Co. 4.3% Exxon Mobil Corp. 3.2 Citigroup 2.9 AT&T 2.7 Medtronic 2.3 Bank of America 2.2 Microsoft 2.2 EMC Corp. 2.0 Amgen 1.9 Muenchener Rueckvers 1.9 Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information, you may obtain prospectuses for mutual funds, any applicable annuity contract and the annuity s underlying funds and/or disclosure documents from your registered representative. Read them carefully before investing. 5

3 CDs Offer Rate Guarantees, but Know the Rules Included in the menu of Deferred Compensation Plan investment options are certificates of deposit (CDs) offered through Washington Mutual Bank. CDs are offered at terms of between one and five years. These options may be attractive for investors looking to lock in a guaranteed rate of return for a certain period of time using an FDIC-insured product.* However, individuals investing in or contemplating investing in CDs should be aware of some of the unique features of these investments, particularly as they are offered under the City s Plan. Minimum investment requirements, penalties for early liquidation and provisions for what happens to your investment at the expiration of a CD term are all important pieces of information with which you should be familiar. Following is a summary of key provisions affecting CDs: The minimum investment amount for any CD purchase is $1,000. You must have existing assets within the Plan to transfer to the CD (meaning you cannot fund a purchase directly from Plan payroll contributions). You can invest in a CD at any time of the year. However, the maturity date is rounded to the next calendar quarter end. For example, if you invest money in a one-year CD on October 10, 2006, your maturity date will be December 31, If you do nothing, an expiring CD will automatically renew for an identical term. Advance notice of a maturing CD is printed on your quarterly statement one quarter prior to maturity. For example, if your CD is maturing on December 31, 2007, you will see the maturity notice on your statement for the period ending September 30, If you do not wish to automatically renew your CD at maturity, you can instruct Great-West Retirement Services at any time prior to the maturity date. Great-West Retirement Services will keep your instructions and apply them at maturity. If you invest in or are renewed for a CD term and change your mind about wanting to invest, the grace period after maturity in which you may move money without penalty is 10 calendar days. If you wish to move your money out of a CD after the 10 calendar day grace period or at any time prior to maturity, the following penalties will apply: 1. One-year term: penalty equal to 90 days of interest, regardless of whether the CD has been invested for 90 days 2. Two- to five-year terms: penalty equal to 180 days of interest, regardless of whether the CD has been invested for 180 days Exceptions to the penalty are: 1. The withdrawal comes after a participant has been determined incompetent by a court or other administrative body with jurisdiction 2. Death of the participant A penalty equal to seven days of interest is assessed on the following special withdrawals when the distribution occurs within six days after investing funds in a CD: 1. Taxable distribution for reason of approved hardship of the participant 2. Tax-reportable distribution for reason of severance of employment by the participant 3. Plan transfer of the funds to another Washington Mutual CD with another plan (i.e., different employer) of a similar type and duration as available in the new plan For the special withdrawals, the penalty can be avoided if the distribution occurs after the seventh day of investing the funds in a CD. Each of the investments offered in the City s Plan has its own unique features, and CDs are no exception. Knowing how they work helps you make informed decisions regarding whether they are the right investment for you. * Federal deposit insurance protects the first $250,000 of deposits that are payable in the United States on certain retirement accounts at a bank or savings institution. Web Site Improvements Provide Easier Access, More Information We are pleased to announce the following enhancements to the Plan s Web site at Faster load times for pages Print-friendly features for printing screens Transaction History page now includes additional details, such as dividend and fee postings, and combines Completed Transfers, Contribution History and Withdrawals Fund overviews are now sorted by asset class rather than alphabetically Online prospectuses are now sorted by asset class rather than alphabetically PDF documents now open in a new window The Web site is your best resource for monitoring and making changes to your account. If you re not a frequent user of the site, now may be a great time to check out the more user-friendly format and some of the powerful tools available. If you don t have a Personal Identification Number (PIN) or are having difficulty establishing a Username to give you access, call KeyTalk at (888) to request assistance. 1 4

4 Investment Option Returns as of June 30, 2003 Investment Option Returns as of September 30, Annualized Yield for Quarter FDIC Insured Savings Account Options 4th Qtr '06 3rd Qtr '06 2nd Qtr '06 1st Qtr '06 4th Qtr '05 Washington Mutual Liquid Savings Account % 5.35% 4.84% 4.39% 3.75% Washington Mutual Certificates of Deposit-1 Year 2,3, Washington Mutual Certificates of Deposit-2 Year 2,3, Washington Mutual Certificates of Deposit-3 Year 2,3, Washington Mutual Certificates of Deposit-4 Year 2,3, Washington Mutual Certificates of Deposit-5 Year 2,3, Annualized Yield for Quarter New Contributions Only Fixed/Stable Value Options 4th Qtr '06 3rd Qtr '06 2nd Qtr '06 1st Qtr '06 4th Qtr '05 Hartford Life General Account 2,5,8 4.10% 4.10% 4.10% 4.10% 4.30% Current performance may be lower or higher than performance data shown. Performance data quoted represents past performance and is not a guarantee or prediction of future results. For performance data current to the most recent month end, please visit The investment return and principal value of an investment will fluctuate so that, when redeemed, shares/units may be worth more or less than their original cost. Funds may impose redemption fees on certain transfers, redemptions or exchanges if assets are held for less than the period stated in the fund s prospectus or other disclosure documents. For more information, please refer to the fund s prospectus and/or disclosure documents. Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information, you may obtain prospectuses for mutual funds, any applicable annuity contract and the annuity s underlying funds and/or disclosure documents from your registered representative. For prospectuses on Self-Directed Brokerage, contact First Trust at (866) Read them carefully before investing. Option Inception Separate Average Annualized as of 09/30/ Calendar Year 6 Operating Date Account YTD 1 Year 3 Years 5 Years 10 Years Since Incep Expense of Option Inception 10 Galliard Stable Value Fund % 4.55% 4.35% 4.75% 5.50% 6.68% 4.29% 4.15% 4.55% 5.67% 6.33% 0.15% Sep-85 n/a Option Inception Separate Average Annualized as of 09/30/ Calendar Year 6 Operating Date Account Variable Investment Options YTD 1 Year 3 Years 5 Years 10 Years Since Incep Expense of Option Inception 10 Bond: Active MSIF Trust Core Plus Fixed Income: INST 2,7 2.92% 4.13% 4.59% 5.24% 6.52% 8.89% 4.81% 4.62% 5.65% 6.63% 10.35% 0.45% Nov-84 n/a Bond: Index Vanguard Total Bond Market Index Fund Inst. 2, Sep-95 n/a Balanced Hartford Advisers HLS 8, N/A Mar-83 May-99 Large-Cap Stock: Active Capital Guardian U.S. Equity Fund N/A N/A N/A N/A N/A 0.48 Apr-88 May-03 Hartford Stock HLS 8, N/A Aug-77 May-99 American Funds Investment Company of Amer A Jan-34 n/a Fidelity Magellan Fund May-63 n/a American Funds Growth Fund of America A Dec-73 n/a Large-Cap Stock: Index Vanguard Institutional Index Fund Jul-90 n/a Mid-Cap Stock Hartford Capital Appreciation HLS 8, N/A Apr-84 May-99 Small-Cap Stock: Active 11 Lotsoff Small Capital Equity Fund N/A N/A N/A N/A N/A N/A 0.95 Jan-93 May-03 Small-Cap Stock: Index 11 State Street Russell 2000 Index Trust Fund C N/A Mar-00 n/a International Stock: Active 12 Fidelity Diversified International Fund Dec-91 n/a International Stock: Index 12 DWS EAFE Equity Index Fund 7, Jan-96 n/a Profile Portfolios 13 Conservative N/A N/A N/A N/A 0.10 May-02 n/a Moderate N/A N/A N/A 0.11 May-02 n/a Aggressive N/A N/A N/A N/A 0.12 May-02 n/a Benchmark Indices Lehman Brothers Aggregate Bond N/A N/A Jan-76 n/a MSCI EAFE N/A N/A Dec-69 n/a Russell 2000a N/A N/A Dec-77 n/a Standard & Poor s N/A N/A Dec-27 n/a Self-Directed Brokerage Option 14 OptionsPlus Self-Directed Brokerage Option Please consider the investment objectives, risks, fees and expenses carefully before investing. For mutual fund prospectuses, to enroll or to speak with a representative for the Self-Directed Brokerage option, please call First Trust at (866) Read them carefully before investing. To make changes to your existing OptionsPlus account, call the PlusLine at (888) Transfer restrictions may apply. See Fund Data Sheets for more information. 3 Minimum investment of $1,000 is required; early withdrawal penalty may apply. 4 Certificates of deposit are insured and offer a fixed rate of return, whereas both the principal and yield of bonds and stocks will fluctuate with market conditions. 5 Rate guaranteed for new deposits made during this quarter only. 6 The average annual and calendar year returns for the funds reflect actual total returns for each fund, net of fund operating expenses. Any administrative fees or expenses charged will reduce the overall rate of return. 7 Mutual fund investment option. 8 The underlying securities in the portfolio and the composition of the respective securities are subject to change. Investment options are available under a fixed or variable contract issued by Hartford Life Insurance Company and are principally underwritten by Hartford Securities Distribution Company, Inc. and sub-advised by Wellington Management Company, LLP. 9 The Option Operating Expense includes an estimated 0.10% Mortality and Expense Risk Charge. 10 Standardized returns date from the inception of the separate account in which the underlying assets are held. Separate account 457 was established by Hartford Financial Services Group, Inc. on May 4, All calendar year returns prior to the separate account inception date are computed using hypothetical unit values that are based on the underlying fund s performance less separate account charges and assume the investment option was available as of the inception date of the underlying fund for the periods indicated. The performance shown is calculated based upon an investment-only contract and does not reflect charges of any other service provider. 11 Equity securities of companies with relatively small market capitalization may be more volatile than securities of larger, more established companies. 12 Foreign investments involve special risks, including currency fluctuations and political developments. 13 The asset allocation options made available to you through your Plan include investment options made up of a mix of your Plan s individual investment options. With each quarterly statement, you are able to determine the value of your account allocated to an individual investment option as of the rebalancing date of the asset allocation option by multiplying the value of your account allocated to the asset allocation option by the percentage of the allocation option in the individual investment option. For example, if you have $500 in Allocation Option 1 and 10% of Allocation Option 1 is represented by the ABC Fund, you would multiply $500 x 10% to determine that $5 of your account value in Allocation Option 1 is invested in ABC Fund as of that date. In order to determine the number of shares of the individual investment option, you may divide the portion of your account value represented by the ABC Fund ($5 in the above example) by the daily share price of the ABC Fund. For more information about the Profile Portfolio options, including specific underlying funds used, please log on to the Web site or call a local service center representative at (888) Participants choosing the OptionsPlus Self-Directed Brokerage option will be charged an additional annual administrative fee of $75 per year. There are no per-transaction fees. Available through First Trust Corporation; call (866) for more information about this option. OptionsPlus securities are not offered through GWFS Equities, Inc. 15 Formerly Scudder EAFE Equity Index Fund. Transfer Restrictions Transfers out of the Galliard Stable Value Fund must be invested in a variable investment option for a minimum of 90 days prior to investing any funds in the Hartford Life General Account or the Washington Mutual Liquid Savings Account. Transfers may not be made directly from the Galliard Stable Value Fund to the Hartford Life General Account or the Washington Mutual Liquid Savings Account. Transfers out of the Hartford Life General Account must be invested in a noncompeting variable investment option for a minimum of 90 days prior to investing any funds in the Galliard Stable Value Fund, Washington Mutual Liquid Savings Account, Washington Mutual CDs, Vanguard Total Bond Market Index Fund or MSIF Trust Fixed Income Portfolio. Transfers may not be made directly from the Hartford Life General Account to the Galliard Stable Value Fund, Washington Mutual Liquid Savings Account, Washington Mutual CDs, Vanguard Total Bond Market Index Fund or MSIF Trust Fixed Income Portfolio. Great-West Retirement Services refers to products and services provided by Great-West Life & Annuity Insurance Company and its subsidiaries and affiliates. Core securities (except OptionsPlus), when offered, are offered through GWFS Equities, Inc., a wholly owned subsidiary of Great-West Life & Annuity Insurance Company, 8525 East Orchard Road, Greenwood Village, CO 80111, (888) Core investment options are through collective trusts, mutual funds and a group fixed and variable deferred annuity underwritten by Hartford Securities Distribution Company, Inc. and sub-advised by Wellington Management Company, LLP. Great-West Retirement Services, KeyTalk and Invest in Your Dreams SM are service marks of Great-West Life & Annuity Insurance Company. All rights reserved. Not intended for use in New York. Form# CB1003N (10/15/06)

5 Pension Act Makes Deferred Compensation Improvements Permanent The Pension Protection Act of 2006, signed by President Bush on August 17, 2006, includes several provisions affecting the City s Deferred Compensation Plan. In addition to making permanent a number of temporary improvements created by prior legislation, there are new improvements, as well. Following is a summary of some of the key benefits of the Act affecting the City s Plan: Permanent extension of higher annual contribution limits, previously set to expire at the end of The 2006 annual contribution limit is $15,000 for participants under age 50; $20,000 for participants age 50 or older; and $30,000 for participants eligible for Standard Catch-Up. Future potential limit increases are tied to changes in the consumer price index. Permanent extension of enhanced portability, including rollovers allowed from IRAs and 401(k), 403(b) and 457 plans. Permanent extension of flexible distribution options. Potential expanded benefits for non-spouse beneficiaries: 1. Non-spouse beneficiaries, such as a domestic partner, sibling, parent or child, may now transfer their inherited portion of a participant s deferred compensation account to an IRA and postpone distribution until the beneficiary attains age 70½ (minimum distribution age) Participants may now file for a hardship withdrawal based on a financial emergency experienced by the participant s domestic partner or other non-spouse beneficiary. Applicants must still satisfy all other eligibility criteria required for hardship withdrawals. Participants must designate their domestic partner or other non-spouse individual as a beneficiary for either of the above provisions to apply. State law may have some impact on specific application of these provisions. Distributions from governmental 457(b) plans may be converted directly into a Roth IRA subject to the Roth IRA conversion rules, eliminating the intermediate step of rolling to a traditional IRA first. The taxable portion of the rollover amount will be taxed at the time of rollover. If you have questions regarding how some of these specific provisions might affect your own situation, please feel free to contact our local Plan staff at (888) , or visit the Plan Service Center at City Hall, 200 N. Spring Street, Room 867, Monday through Friday from 8:30 a.m. to 5:00 p.m. Pacific Time. Seminar: Approaching Retirement; Creating Your Retirement Strategy Duration: one hour This seminar is ideal for employees who are about 10 or so years from retirement. We will quickly review your Plan, then cover a pre-retirement strategy, including savings goals, retirement time horizon and risk tolerance. Please note that any parking fees are at your own cost. Location Date Time City Hall 200 N. Spring St., 10th Floor Room 1050 Los Angeles, CA Marvin Braude Constituent Center (Van Nuys City Hall) Conference Room 1B, 1st Floor 6262 Van Nuys Blvd. Van Nuys, CA Department of Water and Power John Ferraro Building (JFB) San Francisco Room 111 Hope St. Los Angeles, CA November 8, 2006 November 9, 2006 November 14, :00 a.m. and 1:00 p.m. 10:00 a.m. 10:00 a.m. 6