OHIO DEFERRED COMPENSATION

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1 OHIO DEFERRED COMPENSATION Fourth Quarter 2012 How Will You Keep Your Retirement Account Happy? Ohio Pension Reform: Now What? By the time you receive this newsletter, Ohio pension reform will be the new reality. Reform was necessary to provide sustainable benefits for current and future retirees. However, it puts more responsibility on employees to save for retirement to fill the gap between what they will receive from their pension and what they will need to maintain their lifestyle during retirement. Now is the time to reflect on your own retirement goals and to determine if you are going to be ready when it is time to retire. You should also encourage your co-workers to do the same, especially if they are not already saving. Remember that most people do not start saving early enough, so have a conversation with co-workers of all ages. Keith Overly Executive Director According to a report from Nationwide Financial,* 25 percent of Americans admitted that they do not spend any time on saving and investment-related activities, and 51 percent of households are at risk of not being able to maintain their current standard of living in retirement. Has your Ohio Deferred Compensation account been getting the attention it needs? When was the last time you increased your contribution? It doesn t take much effort. A small contribution increase today (and every year) could potentially make a big difference in reaching your retirement goal. With the SMarT Plan, you don t even have to remember to increase just set an increase amount, and it will automatically change every year. With SMarT, your account will be on a better path without any extra thought. The new year is here plan ahead. Your Annual Statement will be arriving soon. It contains details you need to better understand how your account has been performing and how your contributions have added up. This is the perfect time to refresh your plan and factor in a new contribution increase through SMarT. Log in to to enroll in SMarT today. * A publication of the Ohio Deferred Compensation Board

2 Help Me Plan! Are you feeling a little overwhelmed with your retirement planning? If so, we re here to help. Start by going to and click on the Help Me Plan tab. There you will find just what you need to plan a more secure financial future. Investment Basics & Concepts Retirement Investing Tools & Calculators Videos, Podcasts, & More Publications Understanding Fees Forms Understanding investment basics and your options for retirement can guide you to more informed, confident decisions. You'll be able to prioritize your investment goals and create an investment strategy to achieve financial freedom at retirement. The Help Me Plan resources can help you make more informed decisions about your retirement savings. We offer six calculators in Tools & Calculators, including the Interactive Retirement Planner. Knowledge can lead to more confidence in your investment decisions. So, take some time to increase your confidence at today! Meet with a Retirement Planning Specialist (RPS) Would you like to take more control of your retirement? If you need help, now is the perfect time. Each RPS is a Chartered Financial Consultant (ChFC) who can help Program participants with planning for retirement at no charge at the Service Center in Columbus or over the phone. Among the topics covered during an appointment: Your retirement goals Strategies to help minimize taxes Coordinating income from various sources during retirement General information about tax deferrals Withdrawal scenarios Deferred compensation allocation during retirement To schedule an appointment, please call , press 3, and an Account Executive will assist you with making your appointment. Information presented by the Account Executives and Retirement Planning Specialists is for educational purposes only and is not intended as investment and tax advice. 2

3 Deferral Limits Increase for 2013 To better prepare for retirement and as a part of your overall saving strategy, effective January 1, 2013, you can defer more into your Ohio Deferred Compensation account. If you re not deferring the maximum and would like to, you can do it in two ways: call us or do it yourself. Call Us: Call us at and the Service Center Account Executives will help you. Annual Deferral Limits Regular Deferral Limit $17,000 $17,500 Age 50-Plus Deferral Lmit $22,500 $23,000 Catch-up Deferral Limit $34,000 $35,000 Do It Yourself: If you choose to do it yourself, you can use the Automated Telephone System (ATS) or website. You can log in to your account on our website at and increase your deferrals to these new limits. Each year, the Internal Revenue Service sets limits on the amount of wages that you can defer. These limits are tied to inflation statistics, which are recalculated each fall and announced in late October for the following calendar year. Tax Talk If you took a withdrawal or rollover from your Ohio DC account during 2012, you will receive a Form 1099-R from the Program. These forms are scheduled to be printed and mailed the last week of January. Please call the Service Center if you have not received your Form 1099-R by February 11. If you plan to take a withdrawal or rollover from your account in 2013, be aware of the possible tax consequences. A Special Tax Notice Regarding Plan Withdrawals is posted in the Publications section of our website at to help explain your options. If you do not have Internet access or want to discuss this tax information, please call the Service Center at Do You Qualify for a Saver s Credit? The Saver's Tax Credit rewards low and moderate income taxpayers saving for retirement. If you qualify, you could be eligible for a Federal income tax credit on your tax return just for investing in your Ohio DC account. The Saver's Tax Credit is a non-refundable income tax credit that could reduce your Federal income tax liability to $0. Your eligibility depends on your filing status and your modified adjusted gross income. Talk with one of our Account Executives at to find out more and develop an investment plan to meet your retirement goals. Information provided by Account Executives is for educational purposes only and not intended as investment advice. Please contact your tax advisor for more information. Investing involves market risk, including possible loss of the money invested. 3

4 Ohio DC Earns Leadership Award Ohio Deferred Compensation received the 2012 Leadership Recognition Award from the National Association of Government Defined Contribution Administrators (NAGDCA) for our yearlong edelivery campaign. This initiative encouraged participants to switch to paperless statements. edelivery provides secure, easier access to your account statements, and lowers the Program s costs. This award recognizes defined contribution plans for their outstanding achievements in Plan Design and Administration. The 2012 Awards Committee reviewed all of the submissions and chose the top projects in each category to receive a Leadership Recognition Award. The awards were presented at the annual conference in September. Representatives of Ohio DC Board and staff attended the conference and accepted the award for the Program. From left to right: Assistant Director-Finance, Paul Miller; Ohio DC Board Member, Senator Edna Brown; Executive Director, Keith Overly; NAGDCA President, Julia Durand; and Ohio DC Board Member, Representative Jay Hottinger. Unforeseeable Emergency Withdrawals The Internal Revenue Service (IRS) allows you to receive tax-deferred treatment of your 457 deferred compensation funds to encourage you to save for retirement. Because these funds are intended for retirement, the Internal Revenue Code limits the circumstances in which 457 plan participants can withdraw these funds before they separate from their employer s service. A withdrawal while you are employed may only be allowed for an unforeseeable emergency that causes a severe financial hardship. All withdrawals are subject to taxation. An unforeseeable emergency does not include money for college tuition, purchase of a home, living expenses, or overextension of credit, such as credit card debt, loans, etc. The application contains complete information on how to apply. For more information, call our Service Center to discuss your situation and request an application or download an Unforeseeable Emergency Withdrawal Application from the website. Just search unforeseeable emergency. An unforeseeable emergency is generally defined by the IRS as: 1. A severe financial hardship caused by an illness or accident involving a participant, spouse, or dependent. 2. Loss of a participant's property arising from an event due to a casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant, that cannot be relieved by reimbursement or compensation by: Insurance Liquidation of the participant's assets (to the extent the liquidation would not itself cause severe financial hardship) Cessation of deferrals under the Plan. 4

5 Ohio Deferred Compensation Investment Performance Report As of December 31, 2012 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 4th Average Annual Returns Expense Fund # Symbol Quarter 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) 0.62% 8.66% 7.63% 4.31% 5.54% (4) 0.24% 121 LifePath 2015 (2) 7/5/2006 n/a (3) 0.74% 9.55% 7.83% 3.24% 5.19% (4) 0.24% 122 LifePath 2020 (2) 8/1/2005 n/a (3) 1.02% 10.93% 8.10% 2.78% 5.12% (4) 0.24% 123 LifePath 2025 (2) 7/5/2006 n/a (3) 1.21% 12.02% 8.32% 2.39% 4.68% (4) 0.24% 124 LifePath 2030 (2) 8/1/2005 n/a (3) 1.51% 13.18% 8.55% 2.01% 4.88% (4) 0.24% 125 LifePath 2035 (2) 7/5/2006 n/a (3) 1.63% 14.04% 8.65% 1.64% 4.21% (4) 0.24% 126 LifePath 2040 (2) 8/1/2005 n/a (3) 1.76% 14.80% 8.79% 1.27% 4.58% (4) 0.24% 127 LifePath 2045 (2) 7/5/2006 n/a (3) 1.98% 15.72% 8.88% 0.92% 3.71% (4) 0.24% 128 LifePath 2050 (2) 9/30/2007 n/a (3) 1.89% 16.25% 8.98% 0.86% 0.50% (4) 0.24% Stable Value (Annualized Return) 4 th Quarter % 1 st Quarter % 101 Stable Value Option n/a (3) 0.65% 2.71% 3.13% 3.66% 4.28% 0.39% Mutual Funds International Stock Funds 532 Templeton Foreign TFFAX 8.67% 18.89% 4.20% -1.70% 8.34% 0.92% 209 Vanguard International Growth VWILX 6.82% 20.17% 6.34% -1.20% 9.82% 0.34% 310 Vanguard Total International Stock Index (5) VTSNX 6.69% 18.28% 3.90% -3.03% 9.41% 0.13% Small-Cap Stock Funds 402 FPA Capital (6) FPPTX 3.32% 9.70% 11.20% 6.64% 10.16% 0.84% 403 Hartford Small Company HIASX -0.32% 15.64% 11.53% 1.28% 11.41% 0.71% 210 Vanguard Small-Cap Index VSCIX 2.81% 18.26% 13.78% 5.17% 11.01% 0.14% Mid-Cap Stock Funds 208 Vanguard Capital Opportunity VHCAX 5.17% 18.43% 7.30% 2.35% 11.12% 0.41% Large-Cap Stock Funds 202 Dodge & Cox Stock DODGX 2.85% 22.01% 9.92% -0.24% 7.30% 0.52% 306 Fidelity Contrafund FCNTX -1.59% 16.26% 10.73% 1.97% 9.68% 0.81% 307 Fidelity Growth Company FDGRX -2.41% 18.52% 12.89% 3.71% 10.99% 0.84% 291 Janus Twenty JAVLX -0.13% 22.31% 6.30% -0.03% 9.98% 0.94% 565 Vanguard Institutional Index VINIX -0.39% 15.97% 10.85% 1.69% 7.11% 0.04% Balanced Funds 201 Dodge & Cox Balanced DODBX 2.42% 18.32% 9.30% 2.18% 6.84% 0.53% Bond Funds 207 PIMCO Total Return PTRAX 1.10% 10.08% 7.48% 8.07% 6.55% 0.71% 215 Vanguard Total Bond Market Index VBTIX 0.13% 4.18% 6.15% 5.95% 5.21% 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 0.09% 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) 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. (6) This fund may be subject to a redemption fee. Please consult the Program website or fund prospectus for additional information. 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, visit, 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 Walk-in hours: 8:00 a.m. 4:30 p.m. Monday Friday Phone hours: 8:00 a.m. 5:30 p.m. Monday Friday Automated Telephone System: 24 hours, 7 days a week Ohio457@Nationwide.com Ohio Deferred Compensation Board Access the website 24 hours a day, 7 days a week: Check your account balance Exchange funds Access fund information, investment education, and retirement planning tools Change your deferral amount and/or allocation Update your personal information Print a Beneficiary Election Form 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 website. Exchanges received on holidays will be processed as of the market close of the next business day. Exchanges Holiday Date Closed Processed Martin Luther King, Jr. Day 1/21/2013 1/22/2013 Kimberly A. Russell, Chair State College and University Employees Sharon M. Downs, Vice Chair Retired Group Charlie R. Adkins Investment Expert Robert Blair Director, Ohio Department of Administrative Services Edna Brown Senate Jay Hottinger House of Representatives John W. Maurer Retired Group Matthew G. Schulz State Employees Cinthia Sledz Miscellaneous Employees Ken Thomas Municipal Employees James R. Tilling Investment Expert Helen Youngblood County Employees Vacant Investment Expert Keith Overly Executive Director Presidents' Day 2/18/2013 2/19/2013 Good Friday 3/29/2013 4/01/2013 Stay Connected Receive the latest Program information Add or update your address. Log in at 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: Each LifePath Portfolio is based on a target year (when you expect to begin using your money). Portfolios are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. These portfolios experience risks and expense ratios, including applicable fees and expenses, of the underlying funds. There is no guarantee that LifePath Portfolios will provide enough income for retirement. International Funds: Funds that invest internationally involve risks not associated with investing solely in the United States, 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.27 12/2012 This newsletter is printed on recycled paper. 6