Post on 01-Jan-2016
transcript
Comparison between the 401(m) Plan and the OAS Retirement and Pension Plan (RPP)
OAS Staff Association andOAS Retirement and Pension Fund
Daniel R. VilariñoSecretary-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
RemunerationBasic 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
Funding and Contributions
401(m) PlanOAS Retirement and
Pension Plan =
7% of Pensionable
Remuneration
14% of Pensionable
Remuneration
OAS Retirement andPension Fund
Sponsoring Institutions
Participant
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)
Vesting Schedule RPP
35% 35% 35% 35% 40%60%
80%100%
Institutional Contributions
Yea
r 1
Yea
r 2
Yea
r 3
Yea
r 4
Yea
r 5
Yea
r 6
Yea
r 7
100 100
110
95
111
87
111
78
116
94
123
104
131
110
147
124
155
132
155
99
156
119
162
132
42% 28%
57%
23%
OAS RPP
401(m) Plan
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.
Investment Risk
Taxation
I WANTYOU R
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)
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
Agreement
Agreement
between OAS and
between OAS and
USAUSAAgreement
Agreement
between OAS and
between OAS and
USAUSA
G-4 visa holdersG-4 visa holders
in OAS RPPin OAS RPP
Taxation (continued)
G-4 visa holders in
401(m) Plan
G-4 visa holders in
401(m) Plan
The agreement does not apply
Federal Income Tax: 30% of my
gainsi.e. If I had $200,000 in gains, the tax is
$60,000
State Income Tax: Up to 11%
in some jurisdictions
i.e. If I had $200,000 in gains, and State Income tax is 10%, then the tax
is $20,000
Penalty Tax,if younger
than 59 ½: 10% of gains
i.e. In the example the penalty tax would be
$20,000
In the example, if the person was younger than 59 ½ he/she would end paying half his/her gains in
taxes
Retirement Pensions
Participant
In OAS RPP
In 401(m) Plan
Could be eligible for
a PENSION
PENSIONS
for life
with COLAs
problems with withdrawals
no optimal use of funds
run out of funds
Spouse and/or children receive 100% of personal plus
institutional contributions
Other Social Security Benefits
Survivorship Benefits
In OAS RPP
Less than 5 years in the OAS RPP,
spouse and/or
children
ParticipantParticipant
SpouseSpouse
ChildChild
ChildChild
Spouse and/or minor children receive survivorship pensions
Other Social Security Benefits (continued)
Survivorship Benefits
In OAS RPP
More than 5 years in the OAS RPP,
spouse and/or
children
ParticipantParticipant
SpouseSpouse
ChildChild
ChildChild
Designated beneficiaries receive only personal contributions in
account
Other Social Security Benefits (continued)
Survivorship Benefits
In OAS RPP
Any length participation in OAS RPP, no spouse
and no children
ParticipantParticipantDesignated Beneficiary
Designated Beneficiary
Designated beneficiaries receive personal and institutional contributions in account,
designated beneficiaries may not be spouse or children
Other Social Security Benefits (continued)
Survivorship Benefits
In 401(m) PlanAny length
participation in 401(m)
Plan
ParticipantParticipant
Designated
BeneficiaryDesignated
Beneficiary
Other Social Security Benefits (continued)
Disability Benefits
Less than 5 years in OAS RPP
OAS RPP PARTICIPANT
Receives 100% personal and institutional contributions in his/her
account
More than 5 years in OAS RPP
Receives disability pension
Other Social Security Benefits (continued)
Disability Benefits
In 401(m) Plan401(m) Plan
PARTICIPANTDisability Benefits
Contributions pooled together
in a professionally
managed and well monitored Fund
Investment Management
In the OAS RPP: In the 401(m) Plan:
OAS Retirement andPension Fund
Sponsoring Institutions
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
Participant also pays custodian and record-keeper
fees
Average management fees for pool of resources as low
as 0.15%
Loans & pre-termination withdrawals
In the OAS RPP: In the 401(m) Plan:
Loans with theOAS Staff Credit Union
with guaranty of the participant’s RPP
account
Loans with theOAS Staff Credit Union
with guaranty of the participant’s 401(m) Plan
account
Pre-termination withdrawals
Pre-termination withdrawals allowed, however, have to pay
taxes and possibly penalties
Preferential Rates!!!
Transfers from one plan to another
OAS Retirement
and Pension
Plan
401(m) Plan
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%
Unless you separate from the sponsoring institution
and are then rehired
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
Participation
OAS Retirement
and Pension Plan
401(m) Plan