Comparison between the 401(m) Plan and the OAS Retirement and Pension Plan (RPP)

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(No Transcript)
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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
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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
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Definitions
Pensionable Remuneration
A kind of before-tax remuneration
Pensionable Remuneration
Basic Salary
Post Adjustment
gt

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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
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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
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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
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Sponsoring Institutions
OAS Retirement and Pension Fund Sponsoring
Institutions
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Funding and Contributions
401(m) Plan
OAS Retirement and Pension Plan

14 of Pensionable Remuneration
7 of Pensionable Remuneration
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Vesting
Personal Contributions
For both the OAS Retirement and Pension Plan and
the 401(m) Plan personal contributions are vested
100 since the beginning.
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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
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Vesting (continued)
Vesting Schedule RPP
Year 7
Institutional Contributions
Year 6
100
Year 5
80
Year 4
60
Year 1
Year 2
Year 3
40
35
35
35
35
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Investment Risk
OAS RPP
162
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156
155
155
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401(m) Plan
147
132
132
131
124
123
119
116
111
111
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110
110
104
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100
100
99
95
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.
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Taxation
I WANT YOU
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.
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Taxation (continued)
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
Agreement between OAS and USA
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
TAXES
G-4 visa holders
in OAS RPP
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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
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 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
G-4 visa holders in 401(m) Plan
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Retirement Pensions
Could be eligible for a PENSION
for life
In OAS RPP
with COLAs
problems with withdrawals
In 401(m) Plan
run out of funds
Participant
no optimal use of funds
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Other Social Security Benefits
Survivorship Benefits
Spouse and/or children receive 100 of
personal plus institutional contributions
In OAS RPP
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Other Social Security Benefits (continued)
Survivorship Benefits
Spouse and/or minor children receive
survivorship pensions
In OAS RPP
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Other Social Security Benefits (continued)
Survivorship Benefits
Designated beneficiaries receive only
personal contributions in account
In OAS RPP
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Other Social Security Benefits (continued)
Survivorship Benefits
Designated beneficiaries receive personal
and institutional contributions in account,
designated beneficiaries may not be spouse or
children
In 401(m) Plan
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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
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Other Social Security Benefits (continued)
Disability Benefits
In 401(m) Plan
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Investment Management
In the OAS RPP
In the 401(m) Plan
Each individual on his/her own
Contributions pooled together in a professionally
managed and well monitored Fund
For some this might be an opportunity
For others it might be a burden
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Fees
In the OAS RPP
In the 401(m) Plan
Fees paid out of the Funds Operational Reserve
Fees paid out of the Participants account
The Funds 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
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Loans pre-termination withdrawals
In the OAS RPP
In the 401(m) Plan
Loans with the OAS Staff Credit Union with
guaranty of the participants RPP account
Loans with the OAS Staff Credit Union with
guaranty of the participants 401(m) Plan account
Preferential Rates!!!
Pre-termination withdrawals
Pre-termination withdrawals allowed, however,
have to pay taxes and possibly penalties
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Transfers from one plan to another
OAS Retirement and Pension Plan
401(m) 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
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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.
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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
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401(m) Plan and Continuing Contracts
OAS Retirement and Pension Plan
Participation
401(m) Plan
Participation
Continuing Contract
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Questions and Comments?
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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. [phone]
• Fax. [phone]
• dvilarino_at_oas.org
• http//www.oas.org/retirementfund