Participant Disclosure

Transcription

1 Participant Disclosure ERISA 404(a)(5) compliance document 8/30/2012 This material relates to our Retirement Plan which provides Schwab Personal Choice Retirement Accounts (PCRA s) The content of this disclosure is focused on: Plan expense information that may affect any plan participant Information about self directed brokerage accounts under our plan This disclosure does not address pooled investments or investments other than listed assets under the self directed brokerage account for each participant FBO (For the Benefit Of) account. These listed assets may include mutual funds, stocks, bonds, and other equity investments. The information about self directed brokerage accounts applies only to the contribution accounts that permit participant directed investments. Directed Brokerage Account Plan Page 1

2 Preliminary Information What is the purpose of this ERISA 404(a)(5) disclosure? The Department of Labor believes that, as a participant in our Employer-sponsored retirement plan, you will make better choices for your retirement savings and investments if we provide you with the following: General information about the plan parameters for investing; The potential administrative expenses that may be charged against plan accounts; The potential individual expenses that may be charged against your plan accounts; Understanding investment objectives and terminology; A statement about fees and investment expense information; and A Comparative Chart for designated investment alternatives. Who should receive this disclosure? This disclosure is being provided to each employee who has satisfied the plan eligibility requirements and reached an entry date to be eligible to participate in the company s 401(k) or 403(b) retirement plan. Individually Managed Accounts provided by: Charles Schwab Personal Choice Retirement Accounts Listing of the more common possible individual level fees other fees may apply: Participant-level fees charged by our Third-Party Administration Firm Participant-level fees charged by our Financial Service Company Review and preparation of participant loans $75.00 Distributions Upon Termination of Service $ In-Service, Hardship or QDRO Distributions $ QDRO Review (more if contested QDRO) $ rd Party Handling Fee for Distributions $25.00 There may be transaction fees charged against your account, primarily for purchasing or selling an investment General information about the plan parameters for investing. 1. Explanation of circumstances under which plan participants may give investment instructions: Investment instructions may be given under a number of different circumstances. Investment instructions may generally be made on a paper form or by accessing your personal investment account online. First, at the time of plan enrollment when a 401(k) or 403(b) payroll withholding election may be made to start personal savings in a Plan, you can make your decisions for your retirement plan investment portfolio. After the point of your initial enrollment, you may want to periodically re-balance your investments in accordance with a specific allocation ratio (between the different fund selections you have made). 2. Explanation of any limits on investment trading instructions under the plan: The plan may impose reasonable restrictions on the frequency with which plan participants may give investment instructions. However, all plan participants must be allowed to give investment instructions at least once a quarter. 3. Designated Investment Alternatives Our plan s investment platform is structured to permit individually managed, directed brokerage accounts for each plan participant. By making these directed brokerage accounts available, our plan fiduciaries want you to have a wide array of investment options to select from. Therefore, our plan fiduciaries did not choose designated investment alternatives to limit your investment options under the plan. Directed Brokerage Account Plan Page 2

3 4. Description of arrangements for individually managed, directed brokerage accounts or brokerage window accounts: a. How does this arrangement work? Directed brokerage accounts offer a broad range of investment choices for participant direction of investments. b. The biggest advantage with these directed brokerage accounts is that the plan fiduciaries do not limit the individual participant s investment choices to a narrow menu of mutual funds. In addition, the modernized trading and valuation process for investments made through directed brokerage accounts is based on daily valuation methodology so that you may access your personal investment account online to evaluate the status of investments and request changes, at any time. c. How and to whom do you give any investment trading instructions? Investment trading instructions may be handled on the financial service company s website, by accessing your personally managed, directed brokerage account online. Alternatively, investment-trading transactions can often be handled by calling an 800 number. If you need help to understand how investment-trading works, a plan trustee may be able to help you with the investment trading process or the trustee may refer you to another advisor who will be able to help you. Participant direction must be followed by the Plan Trustee(s), any designated ERISA section 3(38) investment manager, and/or the financial service company and its agents. However, these authorized parties may decline to follow a Participant s investment direction (when it would be imprudent to do so), to the extent such direction would: Cause the assets of the plan to be maintained outside the jurisdiction of the U.S. courts; Cause the assets to be invested in collectibles within the meaning of Code Section 408(m), invoking taxable consequences to the individual plan participants, subject to the rules for the 10% penalty tax on early distributions prior to age 59-1/2; Result in a prohibited transaction; Generate unrelated business taxable income (i.e., limited partnerships invested in active businesses, rather than generating passive income); or Jeopardizes the plan s tax qualification; Be contrary to the Plan s governing documents; Cause the assets to be invested in other illiquid assets such as real estate or property; Result (or could result in a loss exceeding the value of the Participant s Account, meaning it is not advisable to make trades through margin accounts. d. Are there restrictions or limitations on trading? The financial service company may impose reasonable restrictions on the frequency with which plan participants may give investment restrictions and/or redemption fees of up to 2% may be charged when certain funds are cashed out or redeemed. e. Who do you contact if you have questions about your individually managed account? You may call the toll-free 800-number (referenced in Appendix A). Potential administrative expenses that may be charged against plan accounts The Employer can decide to charge fees and expenses to the individual accounts of plan participants, when the Employer receives an invoice covering direct fees and expenses for general plan services (e.g., legal, accounting, recordkeeping, and compliance services). This Employer decision about how to handle fee payments for general plan services and whether to charge the individual accounts of plan participants for these fees is not a one-time decision. Rather, the Employer makes a new decision each time an invoice is received with respect to our retirement plan services. Directed Brokerage Account Plan Page 3

4 What are the options the Employer has when the decision is being made about how to handle fee payments for general plan services? See preferred options that are checked. The Employer can choose to handle fee payments for general plan services by paying these fees from company assets, as a general business expense. When this option is selected, your individual account will not be charged. The Employer can choose to handle fee payments for general plan services by using some or all of the non-vested forfeiture amounts from terminated employees accounts to cover direct fees and expenses for general plan services. When this option is selected, your individual account will not be charged. The Employer can choose to handle fee payments for general plan services by charging these fees to the individual accounts of plan participants. This option may be the preferred option, if checked. If not checked, this is an alternative option that the Employer may use from time to time. When this option is utilized for a particular billing period, the basis on which such charges will be allocated to, or affect the balance of, each individual account is based one of the following methods, with pro-rata being the most traditional approach: o Pro rata, based on the ratio of each participant s individual account balance(s) to the total account balances of all participants in the plan. This method is designed to have individuals with larger account balances pay a greater share of the fees and expenses for general plan services. o Per capita, based on the total amount of fees due, divided by the number of participants with account balances. This method is designed to have each individual pay the same dollar amount of the fees and expenses for general plan services Note: Some of the plan's administrative expenses are paid out of revenues generated from the plan's investment alternatives, rather than through direct charges against plan accounts. Potential individual expenses that may be charged against your plan accounts Participant-level fees and expenses may be charged against the individual account(s) of the participant, rather than charging such expenses on a plan-wide basis. The participant-level expenses that may be passed through for payment from the account(s) of plan participants include the following: Lump sum distributions following termination of employment Participant loan initiation and loan maintenance QDRO processing, for distributions due to divorce settlements/child support Hardship distribution processing In-Service distribution processing Account maintenance charges for when a participant postpones benefit distribution after termination of employment Automatic IRA rollover setup for mandatory distributions Investment advisory services Brokerage account set-up and/or maintenance charges Directed Brokerage Account Plan Page 4

5 Understanding investment objectives and terminology Understanding Investment Objectives, Investing and Diversification The Pension Protection Act of 2006 required The Department of Labor (DOL) to provide plan participants with sources of information for investing and diversification. Here is a web link to the information that can be found on the DOL web dol.gov: Understanding Investment Terminology, a Glossary of Investment-Related Terms There are many resources available on the Internet for a general glossary of investment terms, to assist you in understanding the terms found in investment reports or investment articles that you may be reading. We are making available a Sample Glossary of Investment-Related Terms that was prepared by the SPARK institute and ICI. You may go to this web link to obtain that document: Certain mutual funds may charge extra fees For example: Redemption fees may be charged, at the point of selling a mutual fund, based on up to 2% of the sales price (when applicable) Back-end loads may be charged at the point of selling a mutual fund, based on charges ranging from 5% to 6% of the sales price (when applicable) Front-end loads may be charged at the point of purchase, based on legal limits set by NASD rules at 8-1/2% of the purchase price OR by the Investment Company Act of 1940 at 9% of the purchase price (when applicable) When reviewing the individual mutual fund prospectuses to make your investment decisions or calling the 800 number of the financial institution for fund information, it is especially important to watch for whether any of these special charges apply to your fund choices. For more details about mutual fund expenses, you may want to review the following links: Statement about fees and investment expenses information The specific amount of certain fees associated with the purchase or sale of a security through each individually managed, brokerage account or brokerage window, may not be known by the Employer or the financial service company (in advance of an electronic transaction being made). The current fee schedule for Schwab PCRA s is provided at the end of this disclosure and is subject to change always go online to get the latest applicable schedule. With such a broad set of fund choices being available through each individually managed, directed brokerage account or brokerage window, the idea of compiling and providing you with a list of all investment choices made by employees participating in the plan and showing the potential investment expenses for each particular investment was not viable especially when consideration was given to the possibility that individual plan participants could become more overwhelmed in trying to sort through a long list of investment expense data when making investment decisions. Directed Brokerage Account Plan Page 5

6 It is advisable that you contact the financial service company before purchasing or selling any security, to ask about any fees or investment expenses, including any undisclosed fees, associated with the purchase or sale of a particular security. The toll-free 800# for the financial service company is referenced in Appendix. You should also be aware that you can access fund fact sheets and prospectuses by going to your personal investment account online. Comparative Chart for Designated Investment Alternatives Not Applicable. Our plan s investment platform is structured to permit individually managed, directed brokerage accounts for each plan participant. By making these directed brokerage accounts available, our plan fiduciaries want you to have a wide array of investment options to select from. Therefore, our plan fiduciaries did not choose designated investment alternatives to limit your investment options under the plan. Hybrid Arrangements with directed brokerage accounts and pooled, trustee-managed investments. In some retirement plans, there may be directed brokerage accounts set up in addition to there being pooled, trusteemanaged investments. This disclosure is only meant to address the portion of the plan involving participant directed accounts. Directed Brokerage Account Plan Page 6

7 Schwab Personal Choice Retirement Account (PCRA) Pricing Summary Effective March 2012 Introduction Schwab provides a broad range of value-added services, some of which have associated fees. This document provides you with a summary of your plan-specifi c commissions and transaction fees for trade orders placed in your Schwab PCRA. This pricing summary supersedes any prior pricing summaries, pricing guides and notices that you may have received. Schwab reserves the right to change or waive fees at our discretion. Applicable Accounts: This pricing summary applies only to the PCRA accounts held at Charles Schwab & Co., Inc., and established on behalf of retirement plan participants. You can obtain more information about PCRA commissions and transaction fees by calling Schwab s dedicated PCRA Call Center at PCRA (7272), Monday through Friday, 9:00 am through 7:30 pm (ET). Or, view the current Charles Schwab Pricing Guide for Retirement Plan Accounts on Schwab.com for a more complete description of all other commissions and transaction fees. Definition of Electronic Trades: Trades placed through one of Schwab s electronic channels, including online (e.g., and Schwab s automated phone services (e.g., Schwab by Phone or TeleBroker ). Certain securities may not be available through all electronic trading channels. Note: Your PCRA is a cash-up-front account. For all purchases, we require cleared funds in the account. When you re selling, we require securities on deposit. It is your responsibility to avoid overspending your account. If your account becomes overspent, Schwab reserves the right to liquidate a portion of your account to cover the debit balance. Broker-assisted fees will apply. Commissions and Transaction Fees 1 Equities Stocks and Third-Party Exchange-Traded Funds (ETFs) Commissions per Executed Trade Trading Channel Transaction Fee Electronic 2 $8.95* Broker-Assisted Electronic transaction fee, plus $25 *Restrictions apply: The $8.95 fee does not apply to foreign stock transactions or large block transactions requiring special handling. Foreign ordinary shares that trade online in the U.S. over-the-counter (OTC) market and do not settle in the U.S. will have a $50 foreign transaction fee added to the cost of the transaction. All broker-assisted trades are subject to service charges. Schwab Exchange-Traded Funds 3 Commissions per Executed Trade in Your Schwab Account Trading Channel Transaction Fee Electronic $0 Broker-Assisted Electronic transaction fee, plus $25 Schwab PCRA Pricing Summary March 2012 Page 1 of 3

8 Mutual Funds 4 Mutual Funds Commissions per Executed Trade No-Transaction-Fee (NTF) Mutual Funds: Trade orders in no load funds available through Schwab s Mutual Fund OneSource 5 service (including Schwab Funds), as well as certain other funds, are available with no transaction fees when placed through one of Schwab s electronic channels. Schwab reserves the right to change the funds we make available without transaction fees and to reinstate fees on any funds. Transaction-Fee Mutual Funds: Trading Channel Purchase Sell Electronic $50 per trade $0 Broker-Assisted Electronic commission, plus $25 service charge per trade $25 service charge per trade Investors should consider carefully information contained in the prospectus, including investment objectives, risks, trading policies, charges and expenses. You can request a prospectus by calling Schwab s dedicated PCRA Call Center at PCRA (7272). You may also request a prospectus online at Please read the prospectus carefully before investing. Options 6 Options Commissions per Executed Trade Options trading in PCRA is limited to covered calls and protective puts. Trading Channel Electronic Transaction Fee $8.95, plus $0.75 per contract Broker-Assisted Electronic transaction fee, plus $25 Options trading in PCRA is limited to covered calls and protective puts. Exchange Process Fee The Securities and Exchange Commission (SEC) assesses transaction fees on national securities exchanges and self-regulatory organizations based on the aggregate dollar amount of sales of certain securities. The SEC recalculates the amount of this fee periodically at least once per year but sometimes more often. National securities exchanges and self-regulatory organizations offset the transaction fees by charging their member broker-dealers such as Schwab, and we, in turn, offset this fee by charging you an Exchange Process Fee for covered sell transactions. U.S. option exchanges charge Schwab and other broker-dealers per-contract fees for purchase and sales of exchange-listed options. The exchanges may charge these fees even on transactions executed on other exchanges, which can result in multiple fees being imposed on Schwab for a single transaction. Schwab offsets these fees by charging you a single Exchange Process Fee for each covered transaction. Any Exchange Process Fee that appears on your trade confi rmation for a sale of an exchange-listed option will combine the offset for the fees charged both by the U.S. option exchanges and by the national securities and self-regulatory organizations. Schwab s Exchange Process Fee will rise or fall periodically depending upon the rate set by the SEC or by the U.S. option exchanges, as appropriate. Schwab PCRA Pricing Summary March 2012 Page 2 of 3

9 Fixed Income Investments 7 Product Type New issues, including Certifi cates of Deposit (CDs) Treasury Bills, Notes, Bonds, and Secondary and Auction Treasury Infl ation-protected Securities (TIPS) Electronic Commission or Mark-up Broker-Assisted Transaction Fee $0 (a selling concession is included in the original offering price) $0 $25 Secondary transactions for Corporate Bonds, Municipal Bonds, Government Agencies, Zero-Coupon Treasuries (including STRIPS), Mortgage- Backed Securities, and Certifi cates of Deposit $1 per bond ($10 minimum/ $250 maximum) Electronic commission, plus $25 Unit Investment Trusts n/a Sales charge applies; see prospectus Preferred REITS Commercial Paper and Foreign Bonds Stock commissions and minimums apply for secondary transactions. These are specialty products -- please call us for information. Note: Our commissions and markups may be slightly less than our published schedule (shown above) due to rounding. Schwab reserves the right to act as principal on any fixed income transaction, public offering or securities transaction. When Schwab acts as agent, a commission will be charged on the transaction. When Schwab acts as principal, the markup is included in the bond price.this is a fee Schwab charges to offset fees imposed on us by national securities and self-regulatory organizations or by U.S. option exchanges. 1 Excluding mutual funds, commissionable trades that execute over more than one day will be charged a separate commission for each additional day; each separate commission will apply to the portion of the trade executed on the corresponding additional day. Electronic trade orders for which price or quantity are changed by the client, and as a result execute over multiple trades on the same day, are each charged a separate commission. 2 Up to 999,999 shares can be placed per trade. 3 The Schwab Exchange-Traded Funds (Schwab ETFs) are distributed by SEI Investments Distribution co. (SIDCO). Charles Schwab Investment Management, Inc. (CSIM) serves as the registered investment advisor to Schwab ETFs. CSIM is a wholly owned subsidiary of The Charles Schwab corporate and an affi liate of Charles Schwab * co., Inc. none of which is affi liated with SIDCO. 4 Schwab s shot-term redemption fee will be charged on redemption of funds purchased through Schwab s Mutual Fund OneSource service (and certain other funds with no transaction fee) and held for 90 days or less. Schwab reserves the right to exempt some funds from this fee, including certain Schwab Funds, which may charge a separate redemption fee, and funds that accommodate short-term trading. 5 Charles Schwab & Co., Inc. (Member SIPC) receives remuneration from fund companies for recordkeeping and shareholder services and for other administrative services for shares purchased through Schwab s Mutual Fund OneSource program. Schwab also may receive remuneration from transaction-fee fund companies for certain administrative services. 6 Standard fees apply on both transactions when placing simultaneous orders to sell one or more transaction-fee funds and purchase additional transaction-fee funds with the proceeds. 7 For fi xed income traces placed through one of Schwab s electronic channels, discounts may apply. Schwab Personal Choice Retirement Account (PCRA) is offered through Charles Schwab & Co., Inc., a registered broker-dealer that also provides other brokerage and custody services to its customers Charles Schwab & Co., Inc., (Member SIPC). All rights reserved. IAN-JMM ( ) MKT38796IPCRA-05 (03/12) Schwab PCRA Pricing Summary March 2012 Page 3 of 3