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

Sponsoring Institutions

OAS Retirement andPension Fund

Sponsoring Institutions

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

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 dvilarino@oas.org http://www.oas.org/retirementfund