Transcript Document 7645789

Comparison between the 401(m)
Plan and the OAS Retirement and
Pension Plan (RPP)
OAS Staff Association and
OAS Retirement and Pension Fund
Daniel R. Vilariño
Secretary-Treasurer
OAS Retirement and Pension Fund
December 6, 2011
OAS HQ, Washington, DC
Topics:
Definitions
Funding and contributions
Vesting and forfeitures
Investment risk
Taxation
Retirement pensions
Survivorship and disability benefits
Investment management
Fees
Loan and pre-termination withdrawals
Transfers from on plan to another
Reinstatements
401(m) and Continuing Contracts
Questions
Definitions
Pensionable Remuneration
A kind of before-tax remuneration
Pensionable
Remuneration
>
Basic Salary
+
Post Adjustment
Definitions (continued)
Vesting
Vested = Amount that I can withdraw when my
employment ceases
Unvested = Forfeitures, the amount (if any) that
remains in the Fund when my
employment ceases
Definitions (continued)
Institutional Contributions
When we talk about the “institutional
contributions” in the account, we refer not only
to the contributions deposited by the employer
there, but also the interest these contributions
generated
Definitions (continued)
Personal Contributions
When we talk about the “personal
contributions” in the account, we refer not only
to the contributions deposited by the participant
there, but also the interest these contributions
generated
Sponsoring Institutions
OAS Retirement and
Pension Fund
Sponsoring Institutions
Funding and Contributions
OAS Retirement and
Pension Plan
=
401(m) Plan
OAS Retirement and
Pension Fund
Sponsoring Institutions
Participant
7% of
Pensionable
Remuneration
14% of
Pensionable
Remuneration
Vesting
Personal Contributions
For both the OAS Retirement and Pension Plan
and the 401(m) Plan personal contributions
are vested 100% since the beginning.
Vesting (continued)
Institutional Contributions
The 401(m) Plan has full vesting since the
beginning, the OAS Retirement and Pension
Plan has a vesting schedule with changing
rights from year 0 to year 7 when the participant
becomes fully vested
Vesting (continued)
Year 7
Vesting Schedule RPP
Institutional Contributions
Year 6
Year 5
Year 4
Year 3
Year 2
Year 1
100%
80%
60%
35% 35% 35% 35% 40%
Investment Risk
OAS RPP
162
156
155
23%
155
401(m) Plan
147
57%
132
131
124
123
119
116
111
110
111
110
28%
42%
100 100
95
132
104
99
94
87
78
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
All dates are as of December 31 of the year. Assumes similar investment portfolios with a policy of around 60% in equity and 40% in fixed income.
401(m) returns are net of 1% annual fees. RPP are actual accreditations.
Taxation
I WANT
YOUR
MONEY!!
If you are a US tax
payer, no matter what
Plan you select, you will
have to pay taxes when
you withdraw funds.
Taxation (continued)
G-4 visa
holders
in OAS
RPP
Taxation (continued)
The agreement does not apply
Federal Income
Tax: 30% of my
gains
i.e. If I had $200,000
in gains, the tax is
$60,000
G-4 visa
holders in
401(m) Plan
In the example, if
the person was
younger than 59
½ he/she would
end paying half
his/her gains in
taxes
State Income
Tax: Up to 11%
in some
jurisdictions
Penalty Tax,
if younger
than 59 ½: 10% of
gains
i.e. If I had $200,000 in
gains, and State Income
tax is 10%, then the tax
is $20,000
i.e. In the example the
penalty tax would be
$20,000
Retirement Pensions
In OAS RPP
Could be
eligible for
a
PENSION
for life
with COLAs
problems with
withdrawals
Participant
In 401(m) Plan
PENSIONS
run out of
funds
no optimal
use of funds
Other Social Security Benefits
Survivorship Benefits
Spouse
Participant
Child
Child
Less than 5
years in the
OAS RPP,
spouse
and/or
children
In OAS RPP
Spouse and/or children receive
100% of personal plus
institutional contributions
Other Social Security Benefits (continued)
Survivorship Benefits
Spouse
Participant
Child
Child
More than 5
years in the
OAS RPP,
spouse
and/or
children
In OAS RPP
Spouse and/or minor children
receive survivorship pensions
Other Social Security Benefits (continued)
Survivorship Benefits
Designated Beneficiary
Participant
Designated Beneficiary
Any length
participation
in OAS RPP,
no spouse
and no
children
In OAS RPP
Designated beneficiaries receive
only personal contributions in
account
Other Social Security Benefits (continued)
Survivorship Benefits
Designated
Beneficiary
Designated
Beneficiary
Participant
Any length
participation
in 401(m)
Plan
In 401(m) Plan
Designated beneficiaries receive
personal and institutional
contributions in account,
designated beneficiaries may not
be spouse or children
Other Social Security Benefits (continued)
Disability Benefits
Less than 5 years
in OAS RPP
Receives 100% personal and
institutional contributions in his/her
account
More than 5 years
in OAS RPP
Receives disability pension
OAS RPP
PARTICIPANT
Other Social Security Benefits (continued)
Disability Benefits
401(m) Plan
PARTICIPANT
In 401(m) Plan
Disability Benefits
Investment Management
In the OAS RPP:
OAS Retirement and
Pension Fund
Sponsoring Institutions
Contributions
pooled together
in a
professionally
managed and well
monitored Fund
In the 401(m) Plan:
Each individual on his/her own
For some this might
be an opportunity
For others it might
be a burden
Fees
In the OAS RPP:
In the 401(m) Plan:
Fees paid out of the Fund’s
Operational Reserve
Fees paid out of the
Participant’s account
The Fund’s takes advantage
of economies of scale to
lower fees
Some mutual funds will
charge up to 1.36% of asset
value in fees
Average management fees
for pool of resources as low
as 0.15%
Participant also pays
custodian and record-keeper
fees
Loans & pre-termination withdrawals
In the OAS RPP:
Loans with the
OAS Staff Credit Union
with guaranty of the
participant’s RPP
account
Pre-termination
withdrawals
In the 401(m) Plan:
Preferential
Rates!!!
Loans with the
OAS Staff Credit Union
with guaranty of the
participant’s 401(m) Plan
account
Pre-termination
withdrawals allowed,
however, have to pay
taxes and possibly
penalties
Transfers from one plan to another
OAS
Retirement
and
Pension
Plan
Unless you separate from
the sponsoring institution
and are then rehired
I can leave the 401(m) and begin participation
in the OAS RPP at any moment
I can transfer funds only after 5 years of
participation in the OAS RPP
I can transfer up to 5 years of previous 401(m)
participation, with 2 years I can accelerate the
vesting from 60% to 100%
401(m) Plan
Reinstatements
In the OAS RPP
If a participant in the OAS RPP is separated from service, upon
being re-hired by any sponsoring institution, he/she has the
right to be enrolled in the OAS RPP without having to
participate in the Provident Fund
He/she also has the right to reinstate previous participation in
the OAS RPP, restoring the moneys withdrawn when the
separation occurred plus any interest due to accreditations
given during the period of no participation
If the reinstatement is done, participation time and vesting
rights will count as continuing from the moment of the
previous participation/s. Any forfeitures left when the
separation will be reinstated in the account.
401(m) Plan and Continuing Contracts
If you join the 401(m) Plan
You may be required, at any time, by decision of the Secretary
General, to join the Retirement and Pension Plan.
If you apply for and are selected for a Continuing Contract, you
will be required to participate in the OAS Retirement and
Pension Plan
If you are required to join the Retirement and Pension Plan, you
may keep your 401(m) account. However, no more
contributions will be done to that account
401(m) Plan and Continuing Contracts
Continuing
Contract
Participation
OAS
Retirement
and Pension
Plan
Participation
401(m) Plan
Questions and Comments?
Contact Information

Daniel R. Vilarino (Secretary-Treasurer)
Organization of American States
 Office of the Retirement and Pension Fund
 1889 F. Street, N.W. Office TL-50
 Washington, D.C., 20006
 Tel. (202)458-3844
 Fax. (202)458-6125
 [email protected]
 http://www.oas.org/retirementfund
