Agenda. Stakeholders Meeting. Deferred. Cash Match Plans. Overview of 457 Plan Benefits. Investment Selection and Monitoring. Plan Cost Structure

Transcription

1 Key Overview Stakeholders of the Meeting Deferred Compensation and Cash Match Plans Created Agenda Review of Available Investments Investment Selection and Monitoring Plan Cost Structure Service for Participants Service for Employers Adoption Process 2 VRS Defined Contribution Plans 1

2 Tax-deferred retirement savings plan for all employees of the Commonwealth and participating political subdivisions including wage employees and elected or appointed officials Taxes are deferred until you request a payout from the plan. Tax-deferred 457 Contributions Limits for 2011 Regular Minimum = $10 per paycheck Maximum = $16,500 or 100% of pay, whichever is les Age 50+ Additional = $5,500 (total maximum $22,000) Standard Catch-up Additional = $16,500 (total maximum $33,000) or- Standard Catch-Up Credit, if less Age 50+ and Standard Catch-up cannot be used in the same Age 50+ and Standard Catch-up cannot be used in the same calendar year If an organization is also eligible for and offers a 403(b) plan, participants may maximize both 403(b) and 457 contributions. VRS Defined Contribution Plans 2

3 Reduce taxable income today! AFTER TAX BEFORE TAX Annual pay $30,000 $30,000 Before-tax contribution N/A -1,800 Income subject to tax 30,000 28,200 Federal taxes* 7,500 7,050 Net income 22,500 21,150 After-tax contributions 1,800 N/A Spendable income $20,700 $21,150 *Assumes a flat 25% tax bracket without the standard deduction. 5 Employer Matching Contributions Political subdivisions and school divisions who participate in the Commonwealth 457 Plan may also adopt the 401(a) Cash Match Plan What is it? A retirement savings plan funded by matching contributions for full- or part-time salaried employees of the Commonwealth and political subdivisions (who have adopted the Cash Match Plan) if they are making continuous 457 contributions VRS Defined Contribution Plans 3

4 Limited Distribution Options While Employed While employed there are a few ways to take money from the Plan. DeMinimus distribution Account balance less than $5,000 and- No contributions in last 24 months Unforeseeable Emergency Withdrawal In-service distributions at age 70 ½ or older Transfer to VRS to purchase Credit Employees should be encouraged to maintain savings readily available for emergencies. 7 Flexible Distribution Options Keep your money in the Plan (subject to required minimum distribution rules) Receive: Partial or full lump sum Periodic payments Annuity payments Combination of the above Roll over into an eligible retirement plan [such as a Roll over into an eligible retirement plan [such as a 401(a), 401(k), 403(b), governmental 457(b) or IRA that accepts such rollovers] No fees for any distribution options VRS Defined Contribution Plans 4

5 Additional Distribution Information 457 Deferred Compensation Plan No early withdrawal penalty regardless of age when money is taken out. 401(a) Cash Match Plan (if adopte An IRS penalty for withdrawals prior to age 59½ may apply. Both plans Withdrawals are subject to state and federal income tax. Participants should speak with their tax advisor regarding the application to your specific circumstances. First minimum distributions must be taken by April 1 of the calendar year following the later of: (1) the calendar year in which they reach 70½, or (2) the calendar year in which employment from the employer sponsoring the Plan is terminated. 9 Investment Selection and Monitoring The VRS Board of Trustees establishes the Defined Contribution Plans Investment Policy Statement, which may be changed from time to time. The VRS Chief Investment Officer (CIO) has the authority to hire and terminate investment managers. The VRS Investment Department performs necessary due diligence. 10 VRS Defined Contribution Plans 5

6 Investment Selection and Monitoring An assessment of a potential investment manager s ability to execute a desired investment strategy is based on reasonable criteria including but not limited to: Manager experience, Expertise, Investment philosophy, Cost, etc. Monitoring existing managers is a continuous effort that draws on both quantitative and qualitative elements. Performance, Personnel changes at the portfolio management level, Cost, Changes at the firm level, Changes in investment philosophy of the particular fund, etc. 11 Available Investment Options 18 options available 3 Passively Managed Asset Allocation Funds Income & Growth Balanced Growth Long-Term Growth 7 Diverse Passively Managed Funds Bond Index Fund S&P 500 Fund Russell 1000 Value Fund Russell 1000 Growth Fund Small/Mid Cap Equity Index Fund International Equity Index Fund Real Estate Investment Trust Index Fund 7 Actively Managed Funds Money Market Fund Active Inflation-Protected Bond Fund Active Bond Fund Active High-Yield Bond Fund Active Global Equity Fund Stable Value Fund VRS Investment Portfolio Self-Directed Brokerage Account TD Ameritrade Additional fees apply Open to mutual funds, ETFs, and individual stocks and bonds 12 VRS Defined Contribution Plans 6

7 Cost Structure Recordkeeping Fees Currently 18 basis points (bps) on balance up to $130,000 (for any assets beyond $130,000, there is no additional recordkeeping fee) Example on $10,000 balance account: $10,000 x 0.18% (0.0018) = $18 per year ($4.50 per quarter) There are no additional recordkeeping fees for changing contribution amounts, changing investment elections or transferring balances between funds. Recordkeeping Fee Schedule Plan Assets (in billions) 0 to $ bps $1.2 to $ bps Fee (annualized) $1.7 to $ bps $2.2 to $ bps $2.7 and up 13 bps Cost Structure Investment Management Fees Investment Management Fees (expense ratios) Each investment option has investment management fees that vary by investment option Average expense ratio as of June 30, 2011 was.17% 12 of 18 funds have an expense ratio of.1% or lower Fees are reported monthly and can be found on the Investment Option Performance report, online at or by calling 1-VRS-DC-PLAN1 Investments available within the Self-Directed Brokerage Account will have additional fees associated with them. 14 VRS Defined Contribution Plans 7

8 Cost Structure Administrative Cost Fee paid to VRS for administration of the plan(s) range of annual per participant costs $8.00 to $14.00 per participant for 457 Plan $3.00 to $8.00 per participant for 401(a) Cash Match Plan The Code of Virginia allows employers to collect Admin costs from participants 15 Services for Participants Integration with VRS Benefits VRS works with the Plans record keeper to provide a comprehensive look at the employee s benefits at retirement 457 Plan balances included in myvrs Access Planner 457 Plan included in Member Benefit Profile gap analysis Employees can view their monthly retirement benefit combining their VRS, 457 and Cash Match Plans, as well as other retirement assets they may have Go to and set up a myvrs account to view your own projections 16 VRS Defined Contribution Plans 8

9 Services for Participants Interactive Web-site Available 24 hours a day, 7 days a week Easy, convenient access to daily account information with PIN Print out plan related forms and literature Change contribution amounts Transfer among investment options Change investment elections for future contributions (Click on Defined Contribution Plans) 17 Services for Participants Main Page To access personal account information and make transactions To access general plan and investment information 18 VRS Defined Contribution Plans 9

10 Services for Participants Automated, toll-free phone system Easy, convenient access to daily account information Automated system available 24 hours a day, 7 days a week Participant Service Representatives available from 8:00 am to 8:00 pm Monday through Friday (except NYSE holidays) Change contribution amounts Transfer among investment options Change investment elections for future contributions Request Plan forms 1-VRS-DC-PLAN (Option 1) 19 Services for Participants Virginia Service Center Virginia-based staff dedicated to participant education & information Regional Registered Representatives Kelly Hiers David Detamore Mackenzie Moss Janice Parker Virginia Plans Manager, Richmond/Central VA Central/Northern VA Representative Tidewater Representative Western VA Representative 919 E. Main St (SunTrust Bldg), 16 th Floor, Suite :30 a.m. 5:00 p.m., Monday Friday, except Commonwealth holidays 1-VRS-DC-PLAN (Option 2) 20 VRS Defined Contribution Plans 10

11 Services for Participants Workshops and Webinars Deferred Compensation Regional Education Meetings Conducted monthly (March through October) throughout Virginia On-site presentations as requested Individual Counseling On-site or by telephone Educational Webinars Conducted monthly throughout the year Require use of phone, computer and Internet access Live and interactive Recorded Webinars Enrollment Asset allocation (coming soon!) Distribution options (coming soon!) Calendar available at Select Defined Contribution Plans, then Commonwealth of Virginia Deferred Compensation Plan Participant Education 21 Services for Employers Resource Center and The Employer View Resource Center for Employers Dedicated Web site for employers to access Plan information, publications and forms, investment information and FAQs The Employer View Quarterly e-newsletter for employers Provides Plan and legislative updates, timely articles and tips and suggestions to help employees 22 VRS Defined Contribution Plans 11

12 Services for Employers Webinars and Publications Employer Webinars Monthly presentations Focus on Plan features and Plan and legislative updates Promoted through Employer Web site, outreach from registered representatives and VRS and Plan publications Employer Resources and Publications Employer Resources Guide Planning and Investment Guide Guide to Web Site and IVR DCREM schedule 23 Adopting the 457 Plan VRS does not respond to RFPs For information regarding how to adopt the plan, please contact: Susan Keith, VRS Employer Representative Program Manager (804) VRS Defined Contribution Plans 12

13 Important Notes Today s presentation was designed to: Provide an overview of the benefits of 457 Plan participation in general Discuss how Plan investments are selected and monitored by VRS Review the investments available within our plan Discuss the cost structure of the VRS Defined Contribution Plans Provide information regarding Plan services available to participants and employers This presentation does not constitute legal, investment or financial advice of any kind Please consult your own advisors for such advice Any fund performance illustrated in this presentation details historic returns and does not guarantee future investment returns of the funds reviewed Representatives are Registered Representatives of ING Investment Advisors, LLC (member SIPC). VRS Defined Contribution Plans is not a member of the ING family of companies 25 We welcome your questions. VRS Defined Contribution Plans 13