OHIO DEFERRED COMPENSATION

Transcription

1 OHIO DEFERRED COMPENSATION Second Quarter 2010 Report from the Executive Director Participant accounts rebounded strongly during 2009 and through April 2010, as the total Program assets reached an all-time high. Recent market results for May and June have been disappointing. While we don t know what the markets will hold for the future, we know that the economic recovery has been slow, unemployment remains high, and many people are still struggling financially. We also know that your retirement savings depends on your overall financial health. Therefore, Ohio DC, along with Ohio's five retirement systems, the Attorney General, and CollegeAdvantage, is providing you with reliable resources for all types of financial issues. Life Is Complicated Without a Path Who has time to manage retirement investments? You have a life to live. You may be looking for an investment strategy that helps you manage market risk. That s the idea behind asset allocation, a strategy by which you spread your risk across several asset classes. As with all investment strategies, asset allocation and diversification do not assure a profit nor protect against loss in a declining market. If you want an asset allocation solution that s hassle free, consider LifePath options from Ohio Deferred Compensation. The LifePath options are diversified target date funds that let you set it and forget it. Of course, you should periodically review your investment strategy to make sure it is in line with your current goals. When a LifePath option reaches the year in the fund s name, it will be transitioned into LifePath Retirement, where it can provide income and moderate long-term growth of capital over a retirement that may last years. You should know the principal value of LifePath options is not guaranteed, including at the target date. That s because, when investing in any fund, including target date funds, there is market risk involved, including possible loss of principal. However, the fund uses asset allocation to diversify and potentially reduce your exposure to market risk. It s your life. Make it easier on yourself. Consider whether LifePath is right for you. Ask a Program Account Executive about LifePath options by calling continued on page 2... The Ohio Retirement & Savings Awareness website provides tools, calculators, and resources to help you manage your personal finances. Look for the logo at or go directly to org to PLAN for your retirement, and we can help you every step of the way. Keith Overly A publication of the Ohio Deferred Compensation Board

2 ...continued from page 1 Account Executives offer information that is for educational purposes only and not intended as investment advice. The Program s LifePath options are managed by BlackRock, Inc., formerly known as Barclays Global Investors, Inc. Fund profiles may be obtained by calling LifePath options are not mutual funds. Before investing, carefully consider the fund's investment objectives, risks, and charges and expenses. The fund profile contains this and other important information. Read the fund profile carefully before investing. Lower Fees Coming to Templeton Foreign Fund Ohio Deferred Compensation has made a decision that will lower fees for participants invested in the Templeton Foreign fund. Lower fees means that more money stays in your account working for your retirement! On July 16, the Program will convert all investments in the Templeton Foreign fund from A share class (ticker TEMFX) to Advisor share class (ticker TFFAX). The underlying investments are the same in both share classes; only the fees are different. The conversion will lower the annual expense ratio from 1.19% to 0.94%. So, lower fees means that more money stays in your account. Surviving Market Volatility Recently, stock markets around the world have been riding a roller coaster. Even the DOW plunged nearly a thousand points and bounced back in a single day. You may be asking yourself, Should I move my retirement assets out of equities? The short answer is, It depends. If you continue your investment strategy when the markets are topsy-turvy or even through a down market you can focus on long-term goals rather than immediate concerns. Focus on maintaining a consistent plan, and possibly pay less for your investments than their average price over a long period of time. The concept is known as dollar-cost averaging. Dollar-cost averaging does not assure a profit and does not guarantee against loss in a declining market. Five tips for dealing with market turmoil 1. A well-thought-out investment plan is a well-thought-out investment plan regardless of market conditions. If your plan is well thought-out, stick with it. If not, see tip #5 below. 2. If you re in the market for the long-term, don t make investment decisions based on short-term market drops or gains. 3. Evaluate how an investment fits into your overall financial strategy, regardless of short-term market volatility. 4. Buy low! Look at a market decline as a buying opportunity to possibly pay less for a long-term investment. 5. Talk with one of the Program s Account Executives at Information presented by the Account Executives is for educational purposes only and is not intended as investment advice. Consider the impact other major crises have had on the market and, more importantly, the stock market s long-term trend. Generally, investors who have stayed in the market during turbulent times have eventually been rewarded. Past performance does not guarantee future results. Investing involves market risk including possible loss of principal. Looking for more insights? Go to the Ohio DC website at where you can tour our educational resources and Planning Tools, geared especially for participants. Stay Connected Receive the latest Program information It s as simple as adding or updating your address. Log in at 2

3 Why Pay Redemption Fees? Mutual funds are typically managed with long-term investors in mind. When other investors move money in and out of a mutual fund on a frequent basis, it can increase the cost of managing the fund and negatively impact returns of long-term investors. Meet a Dedicated Program Champion Therefore, every mutual fund has the option to charge redemption fees that means money coming out of your account to investors who exchange into and out of their fund within a relatively short period of time. Each fund can determine the required holding period (minimum number of days you need to own a fund) and the redemption fee rate. Only shares purchased by exchanges into these funds might be charged redemption fees, when these same shares are subsequently exchanged out. The following table shows our investment options that have holding periods and that require a redemption fee. Fund Name Holding Period (days) Redemption Fee Rate FPA Capital 90 2% Vanguard Capital Opportunity Vanguard International Growth Vanguard Total International Stock Index 365 1% 60 2% 60 2% Because other Program investment options may determine the need for redemption fees in the future, this table is subject to change. If you have questions about redemption fees, please call an Account Executive at Holiday Schedule The Service Center and exchange processing will be affected by the following New York Stock Exchange holiday schedule. When the Service Center is closed, you may still access your account by using the automated telephone system or the website. Exchanges received on holidays will be processed as of the market close of the next business day. Exchanges Holiday Date Closed Processed Labor Day 9/6/2010 9/7/2010 Tammy Barr Ohio Deferred Compensation would like to recognize and offer our sincere thanks to participants who go out of their way to make a difference in the lives of others. This quarter, we would like to recognize Tammy Barr who is employed by the State of Ohio s Cambridge Developmental Center. Ms. Barr is an excellent promoter of Ohio DC as one way to help employees prepare for retirement. She demonstrates her long-term commitment to helping fellow employees by: z Taking time to tell every new employee about the benefits of the Program z Personally escorting participants to meet with Ohio DC s local Account Executive to get their questions answered z Promoting with employees the importance of regularly increasing deferrals z Reviewing her own account with the local Account Executive at every visit to keep up with Program changes and economic developments z Sending multiple notices to all employees about any pending visit by Ohio DC to ensure that no employee gets left behind It is clear that Ms. Barr takes a personal interest in helping employees become more educated about retirement savings. This seems to be a consistent theme from the State of Ohio s Developmental Center employees. Over the years, we have noted that some of our most active Program Champions are from the Developmental Centers. Ohio DC is grateful to Tammy Barr and others like her who demonstrate a high level of commitment to educate others. This individual s experience may not be representative of other plan participants. There is no guarantee their objectives will be met. 3

4 Test Your Knowledge... Ohio Deferred Compensation Quiz True or False? 1. As a participant in the Ohio Police & Fire DROP program, I am allowed to roll DROP assets into Ohio Deferred Compensation. 2. All tax-deferred plans require participants to wait until they reach age 59½ to withdraw money in order to avoid a tax penalty. 3. Participants in Ohio Deferred Compensation cannot contribute to both a 457(b) and a 403(b) plan in the same year. Answers: 1. TRUE. We can accept a rollover in from any DROP program, which is technically an Internal Revenue Code (IRC) 401(a) asset. Many other taxdeferred plans can also be rolled in, including traditional IRAs, 403(b)s, 401(k)s, SEP/IRAs, and pension PLOPs. 2. FALSE. While many types of tax-deferred plans require you to wait until age 59½ to avoid penalties, deferred compensation plans under (IRC) Section 457 including Ohio Deferred Compensation have no early withdrawal penalty provision. 3. FALSE. You can contribute the maximum amount to both a 457(b) and a 403(b) plan in the same year. Contact an Account Executive for more information on plan limits. Neither Ohio DC nor the Account Executives offer tax, legal, or investment advice. Evening Seminars Offered in Columbus and Cincinnati Areas Our Account Executives will present evening educational seminars in Columbus on September 27 and Cincinnati on September 29 covering basic topics: asset allocation, risk tolerance, catchup deferrals, and withdrawal options. As a part of the workshop and afterwards, we look forward to addressing individual questions, but will not be able to perform detailed individual account reviews. Please register for these evening seminars today to learn more about your Ohio DC retirement savings plan! Feel free to bring your spouse or a co-worker. Space is limited. Call to register for one of the above seminars. Complete information is available at Your Voice, Your Choice! 2010 Ohio Deferred Compensation Board of Trustees Election Notice You Have a Voice in the Decisions that Can Affect Your Ohio DC Account Meet Your Board Every other month, the Ohio Deferred Compensation Board of Trustees holds its public meetings on the 12th floor of the OPERS building. The Board is responsible for Program policies, the overall investment plan, and the strategic plan. The Board approves the budget and related services and acts as fiduciaries of the Program, which means they are required to administer the Program for the benefit of all participants. Your Board has thirteen members who are not paid for their work, but are reimbursed for any expenses paid out of their own pocket. They live all across Ohio and travel to Columbus for meetings. Election 2010 Elections for four seats on the Ohio Deferred Compensation Board of Trustees will be held in September. If your representative is involved in an election this year, your voting materials will be mailed on August 23, and your vote must be received by October 1. You will have the option of voting by mail, on the Internet, or over the phone. Elected Board members will serve four-year terms beginning in January The four seats up for election in 2010 include one representative for each of the following groups: State employees, State colleges and universities, Municipal employees, and Retirees. So, take time in this upcoming election to make it truly Your Voice, Your Choice! 4 Meet with a Retirement Planning Specialist A Retirement Planning Specialist (RPS) will be available to meet with you in the following cities on these selected dates to discuss your account: Akron (8/4), Toledo (8/11), Cleveland (9/9 and 10/20), Dayton (9/20), Cincinnati (10/8). Call , press 3, and an Account Executive will assist you with making your appointment. A complete RPS schedule is available online at

5 Ohio Deferred Compensation Investment Performance Report As of June 30, 2010 The results shown represent past performance and should not be considered a representation of future performance or experience. Past performance cannot guarantee future results. Current investment results may be lower or higher than quoted in this report. The principal value and investment return of an investment will fluctuate so that an investor's units/shares, when redeemed, may be worth more or less than their original cost. Performance data current to the most recent month-end may be obtained by visiting Although data is gathered from investment providers, the Program cannot guarantee completeness and accuracy. Please see other important disclosures at the end of this report. Consider the investment objectives, risks, charges, and expenses carefully before investing by consulting your prospectuses, which contain this and other information. Prospectuses are available by calling or visiting Read the prospectus carefully before investing. VRU Ticker 2nd Average Annual Returns Expense Fund # Symbol Quarter YTD 1 Year 3 Year 5 Year 10 Year Ratio (1) Ohio DC Options LifePath Portfolios Inception Date 120 LifePath Retirement (2) 8/1/2005 n/a (3) -2.25% 0.65% 11.99% 1.29% 3.78% (4) 3.78% (4) 0.25% 121 LifePath 2015 (2) 7/5/2006 n/a (3) -4.00% -0.79% 13.11% -1.58% 2.31% (4) 2.31% (4) 0.25% 122 LifePath 2020 (2) 8/1/2005 n/a (3) -5.36% -1.89% 13.58% -3.14% 2.33% (4) 2.33% (4) 0.25% 123 LifePath 2025 (2) 7/5/2006 n/a (3) -6.65% -3.05% 13.86% -4.49% 0.59% (4) 0.59% (4) 0.25% 124 LifePath 2030 (2) 8/1/2005 n/a (3) -7.68% -3.92% 14.25% -5.73% 1.31% (4) 1.31% (4) 0.25% 125 LifePath 2035 (2) 7/5/2006 n/a (3) -8.62% -4.82% 14.59% -6.84% -0.84% (4) -0.84% (4) 0.25% 126 LifePath 2040 (2) 8/1/2005 n/a (3) -9.68% -5.63% 14.77% -7.91% 0.36% (4) 0.36% (4) 0.25% 127 LifePath 2045 (2) 7/5/2006 n/a (3) % -6.34% 15.06% -8.89% -2.17% (4) -2.17% (4) 0.25% 128 LifePath 2050 (2) 9/30/2007 n/a (3) % -6.98% 15.27% % (4) % (4) % (4) 0.25% Stable Value (Annualized Return) 2 nd Quarter % 3 rd Quarter % 101 Stable Value Option n/a (3) 0.85% 1.74% 3.85% 4.40% 4.59% 5.10% 0.35% Mutual Funds International Stock Funds 532 Templeton Foreign TEMFX % % 10.21% -9.09% 1.96% 3.70% 1.19% 209 Vanguard International Growth (5)(6) VWILX % -9.92% 12.01% -9.91% 3.88% 1.14% 0.34% 310 Vanguard Total International Stock Index (5) VGTSX % % 8.64% % 2.77% 1.43% 0.32% Small-Cap Stock Funds 402 FPA Capital (5) FPPTX % -5.64% 21.28% -5.71% 1.52% 8.93% 0.93% 403 Hartford Small Company HIASX -9.99% -3.46% 18.61% -8.95% 2.39% 0.20% 0.75% 210 Vanguard Small-Cap Index VSCIX % -1.29% 25.28% -7.20% 1.50% 4.02% 0.08% Mid-Cap Stock Funds 208 Vanguard Capital Opportunity (5)(6) VHCAX % % 12.53% -6.45% 2.75% 1.91% 0.41% Large-Cap Stock Funds 202 Dodge & Cox Stock DODGX % -7.91% 15.34% % -2.45% 4.99% 0.52% 306 Fidelity Contrafund FCNTX -8.11% -4.80% 16.42% -5.30% 3.05% 2.81% 1.02% 307 Fidelity Growth Company FDGRX % -6.16% 17.28% -4.88% 3.22% -2.33% 0.93% 291 Janus Twenty JAVLX % % 5.24% -3.77% 4.42% -2.87% 0.81% 565 Vanguard Institutional Index VINIX % -6.66% 14.45% -9.75% -0.76% -1.56% 0.05% Balanced Funds 201 Dodge & Cox Balanced DODBX -9.57% -4.54% 14.93% -7.71% -0.10% 5.69% 0.53% Bond Funds 207 PIMCO Total Return PTRAX 2.69% 5.68% 13.04% 10.85% 7.18% 7.56% 0.89% 215 Vanguard Total Bond Market Index VBTIX 3.62% 5.41% 9.45% 7.69% 5.62% 6.33% 0.07% (1) Investment returns for the Ohio DC Options and Mutual Funds have been reduced for gross Expense Ratios. These average Expense Ratios may vary from time to time. The Expense Ratios for the Ohio DC Options are established by the Program and include a 0.10% Program administrative expense. (2) Returns shown for the periods prior to 12/18/2007 are those of the respective LifePath Index F series, net of historical Program administrative expenses. (3) LifePath portfolios and Stable Value Option (SVO) are not publicly traded mutual funds and do not have a ticker symbol or prospectus. These options are available only through Ohio Deferred Compensation. The value of the securities held by the SVO will fluctuate. The SVO focuses on principal preservation and a stable rate of return. (4) Average annual return since inception date. (5) This fund may be subject to a redemption fee. Please consult the Program website or fund prospectus for additional information. (6) Returns include performance of a different share class achieved prior to the inception of the Admiral or Institutional share classes. Returns were not recalculated to reflect the fees of the Admiral share class. Account Executives are registered representatives of Nationwide Investment Services Corporation, Member FINRA 5

6 Contact Us Ohio Deferred Compensation Program is a supplemental retirement benefit plan regulated by Section 457 of the Internal Revenue Code. If you have questions regarding the Program, write or call an Account Executive at: Ohio Deferred Compensation 257 East Town Street, Suite 457 Columbus, OH OHIO DEFERRED COMPENSATION OHIO PUBLIC EMPLOYEES DEFERRED COMPENSATION PROGRAM Hours: Automated Telephone Monday - Friday System: 8:00 a.m. - 5:30 p.m. 24 hours a day, 7 days a week Withdrawal Election Participants who have severed from employment are able to start, stop, change, and restart payments from the Program anytime. At age 70½, participants must meet the minimum distribution requirements of the Internal Revenue Code. Payments may begin after the Program has received the employer s verification of severance, final deferral, and completed Withdrawal Election form. All requests to start payments must be made on signed Program forms. If the forms are returned by the 15th day of the month, payments will start on the 20th day of the following month. Ohio Deferred Compensation Board Kimberly A. Russell, Chair State College and University Employees Sharon M. Downs, Vice Chair Retired Group Charlie R. Adkins Investment Expert Jay Hottinger House of Representatives John W. Maurer Retired Group Eddie L. Parks State Employees Hugh Quill Director, Ohio Department of Administrative Services Payment Options Cinthia Sledz Miscellaneous Employees Ken Thomas Municipal Employees James R. Tilling Investment Expert Jason H. Wilson Senate Lennie Wyatt Investment Expert Helen Youngblood County Employees Keith Overly Executive Director There are flexible payment options from which to choose: Annual percent, dollar amount, or time period Partial lump sum Full lump sum Payments can be made annually, semi-annually, quarterly, or monthly. Participants may delay withdrawals until the year they turn age 70½. Funds that remain in the Program will stay invested as the participant chooses and will continue to be subject to market risk. The Program permits rollovers of any portion of an eligible distribution. However, before making a rollover decision, a participant should carefully compare the investment options available, associated fees, expenses, and accessibility. Investment Performance Report Notes Investment Performance: Investment returns on the Investment Performance Report do not reflect the deduction of the historical administrative fee. The Board may suspend the administrative fee at its discretion. All reported mutual fund returns assume reinvestment of capital gains and dividends and reflect the fund's expense ratio. The Ohio DC Options are not mutual funds or registered investment companies. Administrative Fee: An administrative fee of $2.00 per quarter was charged 1/1/2000 to 9/30/2006. The quarterly $2.00 administrative fee has been suspended since 10/1/2006 to present. Stable Value Option: Annualized returns are net of investment management, custody, principal protection, and plan administration fees. A fund profile can be obtained for the Stable Value Option by calling or visiting LifePath Portfolios: Portfolios are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, these portfolios experience risks and expense ratios, including applicable fees and expenses, of the underlying funds. The use of asset allocation and/or diversification does not guarantee profits. International Funds: Funds that invest internationally involve risks not associated with investing solely in the U.S., such as currency fluctuation, political risk, differences in accounting, and the limited availability of information. Small Company Funds: Funds investing in stocks of small or emerging companies may have less liquidity than those investing in larger, established companies and may be subject to greater price volatility and risk than the overall stock market. Bond Funds: Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds owned by the fund. NRM-3831OH.17 06/2010 This newsletter is printed on recycled paper. 6