Frequently Asked Questions Staff Retirement Plan Net Plan May 1, 2007 Changes

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1 Frequently Asked Questions Staff Retirement Plan Net Plan May 1, 2007 Changes Voluntary Savings Component How do I enroll in the Voluntary Savings Component? Enrollment is done online through the HR Kiosk. To enroll go to Pension and Retirement Information and click on Voluntary Savings Enrollment. As part of the enrollment process you will need to enter your savings percentage (percent of pay you want to contribute) and select your investment options. How much can I contribute to the Voluntary Savings Component? You can contribute from 1% to 15% of your pay subject to certain limits. VS staff contributions are subject to a contribution limit of 15% of net salary capped at 90% of the Compensation limit imposed on U.S. tax qualified plans ( for 2007 $225,500). How often can I change my contribution percentage to the Voluntary Savings Component? You can change your contribution percentage monthly. Changes received by the last day of the month based on HQ time will be effective the first pay period of the following month. What types of investments are offered through the Voluntary Savings Component?! " " # $ %& "! " '()**+ % $ )**! *!,+" $ %$$ $ -.**.- / 0! $!"#$$%!& "'"! # 1

2 3 4+! & $ ( ( )"! 1$ &5, " $ *!( ( ( )"! +# &,! % & 1 $ +##,! 6.*** $.+*** 6***! +*** %$$ $!"#$$-. # %$$($ %$$ ( )* $ How often can I change my investments? You can change your investments monthly. Changes received by the last day of the month (based on HQ time) will be effective the first day of the following month. How do I change my investments in the Voluntary Savings Component? The process to make investment changes mirrors the process to make investment changes in the Cash Balance Component. Simply log on to the HR Kiosk, go to Pension and Retirement Information and click on Net Plan Benefits, then click on Voluntary Savings Component tab. Can I make pre-tax contributions to the Voluntary Savings Component? No. Since the Voluntary Savings Component is part of the overall Staff Retirement Plan, Plan provisions do not permit pre-tax contributions. If I can t make pre-tax contributions to the Voluntary Savings Component, why should I participate when I can save on an after-tax basis elsewhere? Participation in the Voluntary Savings Component offers three distinct advantages. First, while your contributions are after-tax, taxes on all investment earnings are deferred until you receive a distribution of your account balance. This means you have an extended opportunity to earn money on your investments. Second, with the convenience of regular payroll deduction, every pay period you automatically add to your retirement savings by paying yourself first. Third, management fees are lower than fees that would apply if you were to invest on your own outside of the Staff Retirement Plan. When can I receive the money in my Voluntary Savings account? Your account balance will be distributed to you when you retire or otherwise terminate employment with The World Bank. 2

3 Can I withdraw money from my Voluntary Savings account while I am employed by the bank? No. As with the other components, Plan provisions limit distributions solely to retirement, termination of employment, or death. Can I take a loan out from my Voluntary Savings account? No. Plan provisions do not permit loans from any component of the Staff Retirement Plan. What currency will be used for my Voluntary Savings account distribution? Your account will generally be paid in US dollars. However, you may elect to have your account distribution paid in the currency of your choice at the spot exchange rate applicable at the time of payment. Can I convert my Voluntary Savings account distribution to an annuity? No. Payment of your Voluntary Savings account is limited to a lump sum payment. Will I receive a tax supplement on my Voluntary Savings account distribution? A tax supplement applies only to the Defined Benefit and Cash Balance Components of the Plan. A tax supplement does not apply to distributions from the Voluntary Savings Component. You should keep in mind that since your contributions to the Voluntary Savings Component are made on an after-tax basis, any taxes due will apply only to your investment earnings. What happens to my Voluntary Savings account if I die before receiving a distribution? If you die before receiving a distribution, your account balance will be paid in a single lump sum to your designated beneficiary (ies) on Form 845a. Form 845a is the designation of beneficiary form for lump sum death benefit payable from all components (defined benefit, cash balance and voluntary savings) of the pension plan. Cash Balance Component With the expanded investment options under the Cash Balance Component, will I have to make new investment elections for my account? It s up to you whether or not you want to make new investment elections. Your account will remain invested based on your current elections until you make a change. That said, with the expanded options now available, this may be a good time to reevaluate your portfolio mix to ensure it meets your needs. What are the additional investment options offered through the Cash Balance Component? 3

4 ! " " # $ ( ( )"! 1$ &5, " $ *!( ( ( )"! +# &,! % & 1 $ +##,! 6.*** $.+*** 6***! +*** %$$ $ How do I know which investment options to select? While that s a decision you will need to make for yourself based on your risk tolerance and time horizon (the length of time before you will receive your funds), the Bank offers the following resources to help in your decision-making: Investment Fact Sheets provide descriptive information on each of the funds offered, including general risk level, investment objective, and historical returns. The Investment Fact Sheets can be found on the Information on Staff Retirement Plan link on the Retirement and Pension Information home page. You can use any external financial advisor you feel comfortable with. Defined Benefit Component What is the Rule of 60 for pension purposes? Rule of 60 means that the sum of age plus pension service is equal to 60 or more with at least 5 years of pension service. If I met the Rule of 60, will I be eligible to receive a pension? You have the option to either receive a lump sum withdrawal benefit or receive a lifetime pension from the DB component. The lifetime pension becomes payable at age 62 or as early as age 50 with a 5% reduction for each year that your pension effective date is earlier than age 62. If you have 10 or more years of service you will receive a pension from the defined benefit component. If I choose to receive a pension under Rule of 60, what happens to my cash balance? You have the option to receive your cash balance as a lump sum or to convert some or all of your cash balance into an annuity. 4

5 Glossary Terms of investing Diversification: Diversification means spreading your money among several types of investment funds with varying levels of risk. This approach is based on general investment guidance that as one type of investment experiences gains, another may experience losses. Rebalancing: Rebalancing means monitoring your account and, if needed, moving investments to reflect your overall investment strategy. Your investment portfolio strategy will change over time as you close in on your investment horizon. In addition, the investment performance of the different funds in your account may alter the make-up of your portfolio over time. Risk: Risk relates to the chances of a specific investment losing money. While risk can seem scary, it is a natural part of any sound long-term investment strategy. Generally, the greater the level of investment risk, the greater the level of potential investment return. And, while lower risk funds provide a more stable return, there is also the risk that an investment portfolio solely made up of low-risk funds will not keep pace with inflation. A basic guideline is to assume a greater share of risk as a younger employee and less risk as an older employee who is closing in on his/her retirement date. Time horizon: Time horizon refers to the future date at which you plan to access your investments. Generally, the longer the time horizon, the greater the amount of risk you can afford to take with your investment strategy. As you close in on your time horizon, you will want to take less risk with your investments. This factsheet is intended to provide only a summary of the main provisions of the Plan. It neither establishes nor confer any rights. Please note that amendments to the Plan may not always be reflected in the factsheet. The Staff Retirement Plan is the only document that determines the entitlement to and the amount of benefits payable under the Plan, or any rights created by the Plan. All information in this factsheet is available on the Bank s intranet at the Human Resources homepage ( That electronic version may contain modifications 5 and additions to the Staff April Retirement 2007 Plan not reflected here. For specific inquiries, call or 1pension@worldbank.org.