Retirement Savings Guide

Retirement Savings Guide Retirement Solutions Made Simple. Commonwealth of Virginia Defined Contribution Plans

The content of this Guide is intended to introduce you to general investment concepts and help you understand the investments available to you as a Defined Contribution Plan participant. Inside you ll find Features and Highlights for the Plans available to you. Whether your primary retirement plan is the VRS defined benefit plan or one of the Optional Retirement Plans (ORP), you will need to supplement your retirement by contributing to the 457 Deferred Compensation Plan, which is available to all state employees and may be adopted by political subdivisions, including school systems. Commonwealth of Virginia 457 Deferred Compensation Plan (457 Plan) Salaried and wage employees can supplement their employer s pension plan and/or other outside savings by participating in the Deferred Compensation Plan a governmental 457(b) Plan defined by Section 457 of the Internal Revenue Code. You participate in the 457 Plan through salary deferral, and your contributions and any earnings are tax-deferred until withdrawn, usually at retirement. Virginia 401(a) Cash Match Plan Eligible employees who choose to enroll in the Deferred Compensation Plan may be able to receive additional benefits through the Cash Match Plan. Check with your Human Resources office to see if this benefit is available to you. The Optional Retirement Plans (ORP) Employees in certain types of jobs benefit from the portability of a defined contribution plan for their main retirement benefit. If you are a political appointee or school superintendent you have the benefit of participating in ORP. Your employer will notify you of your eligibility to participate. The Virginia Supplemental Retirement Plan (VSRP) Used by VRS participating employers to provide enhanced retirement benefits to designated employees, eligible employees are notified about this benefit by their school administration or by the Virginia Department of Education. Retirement Solutions Made Simple. step one Determine what you want and need and set your goals. step two Gather information and identify the steps that will get you to your goals. step three Take the actions needed to reach your goals. It s important to check your progress periodically to determine if adjustments to your plan are necessary.

Enrolling in the Defined Contribution Plans 457 Deferred Compensation and Cash Match Plans Whether you have the VRS defined benefit plan or one of the Optional Retirement Plans as your primary retirement benefit, or if you are a wage employee, you are eligible to enroll in the 457 Plan. If you qualify for the Cash Match Plan, your employer will send contributions to your Cash Match Plan account. If you are hired or rehired in a salaried position by a state agency on or after January 1, 2008, you will be enrolled automatically in the 457 Plan approximately 90 days after your date of employment. Shortly after you are hired you will receive a password from ING, the Plans record keeper, which you may use to enroll in the Plan online or by telephone. You also may enroll by using the Enrollment and Beneficiary Designation forms included in this kit. Refer to the Commonwealth of Virginia Deferred Compensation Plan Guide to Automatic Enrollment for details. Optional Retirement Plans Your appointing authority will tell you if you are eligible for either the Optional Retirement Plan for Political Appointees (ORPPA) or Optional Retirement Plan for School Superintendents (ORPSS). Your employer will send VRS an Eligibility to Participate Form 65-B (ORPPA) or Form 71-A (ORPSS). VRS will send you the publication Choosing Your Retirement Plan to help you compare VRS and the ORP to determine which will better meet your needs. The mailing from VRS will also contain a VRS65-C (ORPPA) or VRS-71 (ORPSS) that you must complete and return to VRS if you choose the ORP as your primary retirement plan. You have 30 days from the date of the letter you receive from VRS to select your retirement plan. VRS Member Counselors and ING registered representatives are available to assist you. If you do not submit an ORP Election form to VRS within 30 days, you will be covered by the VRS defined benefit plan. Once ING receives your completed ORP enrollment form, you will be sent a password to access and manage your Plan account. Virginia Supplemental Retirement Plan (VSRP) Your school division will tell you if you are eligible for the VSRP. If you are eligible, your employer will send contributions to your VSRP account, which is in addition to the VRS defined benefit plan. Your employer will send a Certification of Eligibility to Participate in Virginia Supplemental Retirement Plan (VRS-83) to VRS to establish your Plan account. You will be contacted by an ING registered representative for assistance to enroll in the Plan. Once you have enrolled in the plan you may manage your account online or by telephone using the password that was sent to you. Go to www.varetire.org and select Account Log-In under the Defined Contribution Plans tab or call the Plan Information Line at 1-VRS-DC-PLAN1 (1-877-327-5261). Password Reset Capabilities When you log on to the Plan website for the first time, you will be prompted to establish a user name and an eight to 20-digit password, which must contain at least one upper and lowercase letter and number. Special characters cannot be used. You also will be asked to choose five security questions to establish future password reset capabilities in case you forget or misplace it in the future. If you misplaced your password and haven t established reset capabilities, there are two ways to obtain a new password: Online at www.varetire.org. Select a plan under the Defined Contribution Plans tab and choose Forgot your password? in the User Login box. Call the Plan Information Line at 1-VRS-DC-PLAN1 (1-877-327-5261) and provide your Social Security number. A reminder of your password will be mailed to your address on record within three business days. Passwords cannot be reused within the next 24 months. Need assistance? Virginia registered representatives are located throughout the Commonwealth and can assist with most aspects of your planning in person or over the phone. Call 1-VRS-DC-PLAN1 (1-877-327-5261), option 2, Monday Friday, 8:30 a.m. to 5 p.m. Eastern Time to schedule an appointment at a location that is convenient for you. Or, stop by the Virginia Service Center at 919 E. Main Street, Suite 1604 in Richmond (SunTrust Building).

Preparing an action plan Contributions to the ORPs are determined by law, but both ORP and VRS members can use the 457 Deferred Compensation Plan to increase retirement income. one two three Participating in the Plans may be one of the best Maintain an emergency fund Retirement savings plans were not designed to be Be consistent Saving and staying focused on the end benefits is critical for achieving a secure financial Make small changes for big results Try keeping a spending journal for a few weeks to help you track decisions you ll ever make. short-term savings vehicles future. Because it is payroll where your money is going and However, unexpected or to replace your household deducted, the 457 Plan is an to identify saving opportunities, challenges will likely cross your path. By taking these steps today, you may have an easier time staying on track to meet your goals. emergency fund. Therefore, it is important that you have another source of savings (or emergency fund) that you can access easily. easy way to save. For many people there comes a point in time when it feels like too many things are competing for your paycheck. Chances are, if you take a closer such as: Bringing your lunch to work. Brewing your coffee. Most experts suggest having three to six months of your living expenses set aside. look at your spending habits you ll find money that could be invested for your future. The 457 Plan allows you to have more money available for savings by deferring income tax Drinking tap water instead of buying bottled water. Renting a DVD and pop your own popcorn on Saturday night. on the amount you contribute. Pay yourself first by contributing to the 457 Plan This chart demonstrates the added value of contributing more money over time. $160,000 $140,000 $156,112 For illustrative purposes only; assumes bimonthly employee contribution made on 15th and 30th of each month and a six percent average annual return. The final account balance does not account for Plan fees or expenses, which would reflect lower net returns. Investment return and principal value will fluctuate so when shares are redeemed they may be worth more or less than original cost. $120,000 $100,000 $80,000 $97,570 $126,841 Earnings Over Time $60,000 $40,000 $46,800 $57,600 $20,000 $36,000 Total Contributions $0 Van: $100 a month ($50 per pay period) for 30 years Val: $130 a month ($65 per pay period) for 30 years Viv: $160 a month ($80 per pay period) for 30 years 1-VRS-DC-PLAN1 (1-877-327-5261) www.varetire.org

joining the 457 plan There is a cost to waiting Sarah starts saving at age 25 and stops saving at age 40. She contributes for 15 years. $25,200 Total contributions $172,604 Approximate value at age 65 Michael starts saving at age 40 and stops saving at age 65. He contributes for 25 years. Look at the difference! $42,000 Total contributions $94,796 Approximate value at age 65 Assumptions: Individuals make a total $100 monthly contribution and receive an employer match of $40 per month, earning a six percent annually compounded return. Contributions are made at the beginning and in the middle of each month. This example is not intended to guarantee an actual rate of return. Actual returns may be more or less, depending on your investments. Just starting out in your career? You might think you can t afford to put much aside, but as mentioned above, making small changes now can make a big difference over the long term. By investing early, your money has more time to work for you. Tax Saver s Credit To encourage low- and moderate-income individuals to save, the government offers a tax credit for contributions to eligible retirement plans. You may be eligible for a credit on your federal taxes equal to a percentage of the first $2,000 you invest in the Plan. The actual amount of your credit is based on your tax filing status and adjusted gross income (AGI) as shown below: Tax credit Joint return Single agi (other filers) AGI 50 percent Less than $35,500 Less than $17,750 20 percent $35,501 - $38,500 $17,751 - $19,250 10 percent $38,501 - $59,000 $19,251 - $29,500 0 percent $59,501 or more $29,501 or more If you take this tax credit you can still deduct your contributions to qualified retirement savings plans as allowed under current law. To find out more information or to see if you qualify, call the Plan Information Line and speak with a Customer Service Associate. Annual Contribution Limits Minimum Contribution: $10 Maximum Contribution: $17,500 Age 50 Catch-Up: $5,500 Standard Catch-Up: $35,000 457 Plan Catch-Up Provisions Current IRS contribution limits are subject to change. Age 50 Catch-Up allows a participant who is at least age 50 before the end of the tax year to make additional contributions of $5,500, for a maximum of $23,000. Standard Catch-Up allows a participant who meets special conditions and has not been contributing the maximum to contribute up to twice the maximum annual contribution amount during the three years prior to their Normal Retirement Age. The current annual limit is $35,000 or the amount of Catch-Up credit available to you, whichever is less. IRS regulations state the Age 50 Catch-Up Provision cannot be used in the same calendar year as the Standard Catch-Up Provision. Are you mid-career or nearing retirement? When starting mid-career or even later, it s important to consider your investment strategies, the amount you have available to contribute and the benefit of deferring income taxes. You may need to contribute more since you have a shorter timeframe and to save on taxes, while being more conservative in your investment choices.

Understanding your investments It s important to make sound, well-educated investment decisions, but before you get started, you should understand a few investment basics. Types of risk Like many things, when it comes to investing, there s no way to avoid risk. There are many risks you should be aware of as you develop your investment strategy. Risks include, but are not limited to: Market risk The risk that the price of securities in a fund will rise or fall sometimes rapidly or unpredictably due to factors such as real or perceived adverse economic conditions, political developments and/or investor sentiment generally. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously. Stocks generally have greater price volatility than bonds. Inflation risk The risk that your account will lose value because your returns are not outpacing the cost of living. Interest rate risk The risk that if interest rates rise, bonds will decline in value. Income risk The risk that a fund s income will decline because of falling interest rates. Default (credit) risk The risk that an issuer fails to pay interest or principal when due or in a timely manner or that negative perceptions of an issuer s ability to make such payments will cause the price of the security to decline. Business risk The risk that an investment will lose value because of a decline in a specific company or industry. Country risk The risk that domestic events, laws and/or regulations will negatively impact a country s securities markets. The importance of asset allocation and diversification Asset allocation involves assigning specific percentages of your investments to different asset classes according to your financial goals, risk tolerance and investment time horizon. Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. It involves distributing your money among different securities, sectors, industries and strategies within a number of asset classes. Here are some ways you can help reduce risk: Diversify Putting your money into a number of different types of investment options that include different types of asset classes and securities can help reduce risk. When you invest in different asset classes and types of investments, some may increase in value while others may decrease in value. Invest for the long term The market will have ups and downs, but if you invest wisely and leave your investments to grow, you ll have a better chance of reaching your long-term investment goals. Be aware of being too cautious Just as you should be aware of investing too aggressively, you should also be aware of being too cautious. When you re ready to retire, you ll most likely be living in a much more expensive world than today. If you don t diversify and instead invest all of your contributions in a conservative investment option, you run the risk that inflation will erode much of your investment gains. Currency risk The risk that the value of a foreign investment, measured in U.S. dollars, will negatively impact fund returns because of unfavorable changes in currency exchange rates. Not investing has its own level of risk: that you won t have enough retirement income to do the things you need or want to do. You can help reduce your risk of not meeting your retirement income objectives by investing in the Plans on a consistent basis over the long term. 1-VRS-DC-PLAN1 (1-877-327-5261) www.varetire.org

creating your investment strategy When developing your investment strategy, you need to consider: How much to save and invest today. Your investment time horizon. Your risk tolerance. Once you determine the answers to these considerations you can create an investment mix that will help you work toward your objective. Asset classes An asset class is a group of securities that typically behave similarly in the marketplace when compared to other groups of securities. The most well-known asset classes are stocks, bonds and cash equivalents (i.e. money market instruments). Each asset class has specific risk and return features to consider. And within each asset class are a range of investment types, each with its own risk factors. While past performance is not a guarantee of future performance, here is a brief overview of what you might expect from the three basic asset classes over the long term. Cash equivalents and stable value investments Cash equivalents are short-term, highly-liquid securities that pay interest, such as money market funds and U.S. Treasury bills. Their objectives are current income and capital preservation. Generally speaking, investment in a money market fund offered through an employer s sponsored plan is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money. While cash equivalents investments have a place in many portfolios, their returns are generally low and may not outpace inflation. Stable value investments seek to provide safety of principal while earning interest income and liquidity. Stable value funds typically invest in short to intermediate duration, high-quality bonds. Bonds By investing in bonds (also called fixed-income investments), you are loaning money to an organization, such as a corporation or the government, in exchange for interest payments. Bond values fluctuate but ordinarily they will not vary as much as stocks. Bond investment options may help offset the higher risk of stocks in a more aggressive investment portfolio, and they may help keep pace with inflation in a more conservative investment portfolio. Stocks By investing in stocks, you are buying shares of ownership in a company. Stocks may have the highest potential for growth over the long term, but also carry a higher degree of risk. Their unpredictable movement up and down in value is called volatility. One way of classifying stocks is through market capitalization. Market capitalization, or market cap, measures a company s size by multiplying the number of shares outstanding by the stock s price. For example, if a company has 10 million shares outstanding at a price of $50 per share, the company s market cap is equal to $500 million. Market cap size is often categorized as: Large (referred to as large cap). Medium (referred to as mid or mid cap). Small (referred to as small cap). Regional educational meetings To help you reach your long-term financial goals, meetings are held throughout the Commonwealth on a variety of topics, including investment basics, retirement planning, retirement distribution strategies, managing your account online and more. To locate a meeting near you, visit the Plan website or call the Plan Information Line.

creating your investment strategy continued Major types of stocks Large-cap stocks are often called blue-chip stocks, a term that comes from the highest valued chips on a poker table. They are stocks of well-established companies that generally pay steady dividends. The vast size and maturity of these companies can make them well positioned to weather inevitable economic downturns. Mid-cap stocks are of companies that generally are established, yet innovative and responsive, and have the potential for continued earnings growth. Their larger capitalization base tends to make them less risky than smaller-cap stocks, though they typically have slightly lower historical returns. Small-cap stocks have the potential for rapid acceleration in earnings and growth, such as Microsoft exhibited in its early stages. Small-cap stocks can be highly volatile, but the companies are often viewed as being on the cutting edge of their industries. Many small-cap companies effectively respond to market changes, but they may also have difficulty weathering economic downturns. International stocks are issued by companies outside of the United States. Whether you invest in the stock of a Japanese auto manufacturer, a German design firm or more volatile emerging markets, international stocks tend to have a high risk and return potential. Political climates may change and currency valuations may rise or fall. But international stocks may also offer you the opportunity to diversify into young, dynamic markets that are early in their growth cycle. Investment option types Your Plans provide you with a wide array of investment options that may include mutual funds, collective trust funds and separately managed funds. When you invest in mutual funds, your money is pooled together with the money of other investors who have the same, or mutual, investment goals. A collective trust fund is a fund created by a bank or trust company that pool the assets of institutional investors for investment purposes. Where a mutual fund and collective trust fund differ is that a mutual fund primarily serves individual shareholders (retail market), while a collective trust fund is available only to institutional investors, such as employers who sponsor retirement plans (like VRS), foundations and endowments. Therefore, collective trust funds tend to have lower fees and expenses than mutual funds because the employer can negotiate investment management fees with the investment manager. In addition, mutual funds and collective trust funds are overseen by different regulatory bodies. A separately managed fund is a fund managed by an investment advisor for a specific employer s plan. All investment option types referenced above typically have a team of investment professionals who handle the buying and selling of investments on behalf of a fund, based on the fund s investment philosophy and objective. 1-VRS-DC-PLAN1 (1-877-327-5261) www.varetire.org

Your Plans investment options The investment options are organized into three pathways. The path approach is designed to make it easier for you to implement your investment decisions. The path approach is flexible; you do not need to choose just one path or investment option. You can mix and match investment options within each path to help you meet your objectives, risk tolerance and overall investing style. Following is a more detailed description of the three investment paths. Path Asset Class Investment Options Do-It-For-Me Path The Do-It-For-Me Path includes a series of target date portfolios for participants who prefer a pre-mixed portfolio that is already diversified. Participants select portfolios based on a projected retirement date and individual needs. Help-Me-Do-It Path The Help-Me-Do-It Path includes a carefully selected menu of 11 funds for participants who prefer to take a more active role in investing and want to construct a portfolio that addresses their individual needs. Capital Preservation Capital Preservation U.S. Bonds Inflation-Indexed Bonds High-Yield Bonds U.S. Large-Cap Stocks International Stocks (Developed) U.S. Small/Mid-Cap Stocks Real Estate Emerging Markets Stocks Retirement Portfolio Target Date 2015 Portfolio Target Date 2020 Portfolio Target Date 2025 Portfolio Target Date 2030 Portfolio Target Date 2035 Portfolio Target Date 2040 Portfolio Target Date 2045 Portfolio Target Date 2050 Portfolio Target Date 2055 Portfolio Money Market Fund Stable Value Fund Bond Fund Inflation-Protected Bond Fund High-Yield Bond Fund Virginia Retirement System Investment Portfolio (VRSIP) Stock Fund International Stock Fund Small/Mid-Cap Stock Fund Global Real Estate Fund Emerging Markets Stock Fund Do-It-Myself Path The Do-It-Myself Path includes a self-directed brokerage account for those who believe they are skilled and knowledgeable about investments. Investments include mutual funds, exchange-traded funds (ETFs) and individual securities. Brokerage Self-Directed Brokerage Account To open an SDBA: Go to www.varetire.org and select a Plan under the Defined Contribution Plans tab. Download the SDBA application from the Forms section. Or call the Plan Information Line at 1-VRS-DC-PLAN1 (1-877-327-5261) to have one sent to you. You have to apply for and set up a separate SDBA before you can trade (account setup can take up to two weeks). You must retain $2,500 in the core investments when using the SDBA. If you have additional questions about the SDBA, you may call TD Ameritrade at 1-866-766-4015.

Your Plans investment options continued Investment Option Investment Type Benchmark Objective Do-It-For-Me Path Retirement Portfolio Target Date 2015 Portfolio Target Date 2020 Portfolio Target Date 2025 Portfolio Target Date 2030 Portfolio Custom benchmarks are calculated using blended returns of third-party indices that proportionately reflect the respective weightings of the Portfolios asset classes. Index weightings are adjusted quarterly to reflect the Portfolios asset allocation shifts over time. Target Date 2035 Portfolio Target Date 2040 Portfolio Target Date 2045 Portfolio Seek to maximize total return with a risk level that may be appropriate for a portfolio s particular timeframe and provide those who are close to or already retired with an appropriate blend of income and inflation protection. The Target Date Portfolios invest in BlackRock s LifePath Index Funds O. Target Date 2050 Portfolio Target Date 2055 Portfolio Help-Me-Do-It Path Money Market Fund Capital Preservation Barclays 3-Month Treasury Bill Index is considered indicative of the average yield of 3-month Treasury Bills. Stable Value Fund Trading Restriction: Money cannot be transferred directly from the Stable Value Fund to the Money Market Fund, the Inflation-Protected Bond Fund or the Self-Directed Brokerage Account (considered competing funds). Money must be exchanged into a non-competing fund and remain there for 90 days prior to it being transferred into the Money Market Fund, the Inflation-Protected Bond Fund or the Self-Directed Brokerage Account. Capital Preservation Custom benchmark represents a hypothetical return generated by the monthly yield of actively traded U.S. Treasuries with a 3-year maturity, plus an annualized spread of 0.50% and is representative of the Fund s expected return profile, given its mandate and book value accounting treatment. Bond Fund U.S. Bond Market Barclays Aggregate Bond Index is considered indicative of the domestic bond market. Inflation-Protected Bond Fund Inflation-Indexed Bonds Barclays U.S. Treasury Inflation- Protected Securities Index is considered indicative of inflation-protected securities issued by the U.S. Treasury. High-Yield Bond Fund High-Yield Bonds BofA Merrill Lynch High-Yield BB/B Constrained Index is considered indicative of the higher-quality, high-yield bond market. Seeks a high level of current income as is consistent with liquidity and stability of principal. The Fund may invest in BlackRock s Government Cash or Money Market Funds. Seeks to provide safety of principal and liquidity while earning a reasonable level of interest income consistent with an underlying portfolio of short- to intermediate-duration high-quality bonds. Seeks to track the performance of the Barclays Aggregate Bond Index by investing in a diversified sample of the bonds that make up the index. The Fund invests in BlackRock s U.S. Debt Index Fund M. Seeks to track the performance of the Barclays U.S. Treasury Inflation-Protected Securities Index by investing in some or all of the bonds that make up the index. The Fund invests in BlackRock s U.S. Treasury Inflation-Protected Securities Fund M. Seeks to outperform the BofA Merrill Lynch High-Yield BB/B Constrained Index over a typical 3- to 5-year business cycle by investing in a diversified portfolio of primarily high-yield securities; may also invest in other securities. The Fund invests in JPMorgan s Corporate High-Yield Fund-Investment Class. There is no assurance that the funds will achieve their objectives. Benchmarks are current as of this printing. You cannot invest directly in the benchmark. The VRS Board and the Plans investment managers may impose restrictions and/or fees that discourage investment trading that could have an adverse impact on the management of a fund, other participants or clients of the fund s management. 1-VRS-DC-PLAN1 (1-877-327-5261) www.varetire.org

Investment Option Investment Type Benchmark Objective Help-Me-Do-It Path Virginia Retirement System Investment Portfolio (VRSIP) Intermediate-term benchmark is a weighted average of the various benchmarks used in the investment programs. Stock Fund U.S. Large-Cap Stocks S&P 500 Index is considered indicative of the domestic large-cap stock market. International Stock Fund Small/Mid-Cap Stock Fund International Stocks (Developed) U.S. Small/Mid-Cap Stocks MSCI World ex-u.s. Index is considered indicative of the international stock market of developed countries across western Europe, the Pacific Rim and Canada. Russell 2500 Index is considered indicative of the small- to mid-cap segment of the domestic stock market. Global Real Estate Fund Real Estate FTSE EPRA/NAREIT Developed Index is considered indicative of listed real estate companies and REITs worldwide, including in the U.S. Emerging Markets Stock Fund Emerging Markets Stocks MSCI Emerging Markets Index is considered indicative of the emerging markets stock universe. Seeks to maximize return while managing risk within an acceptable range, as it relates to the VRS defined benefit plan. A target date portfolio will serve as the Interim Account VRSIP. Seeks to track the performance of the S&P 500 Index by investing in stocks that make up the index. The Fund invests in BlackRock s Equity Index Fund F. Seeks to track the performance of the MSCI World ex-u.s. Index by investing in stocks that make up the index. The Fund invests in BlackRock s MSCI World ex-u.s. Index Fund F. Seeks to track the performance of the Russell 2500 Index by investing in a diversified sample of the stocks that make up the index. The Fund invests in BlackRock s Russell 2500 Index Fund F. Seeks to track the performance of the FTSE EPRA/NAREIT Developed Index by investing in stocks that make up the index. The Fund invests in BlackRock s Developed Real Estate Index Fund F. Seeks to track the performance of the MSCI Emerging Markets Index by investing in stocks that make up the index. The Fund invests in BlackRock s Emerging Markets Index Non-Lendable Fund F. Do-It-Myself Path Self-Directed Brokerage Account Brokerage Information about the Self-Directed Brokerage Account is available online at www.varetire.org under the Defined Contribution Plans tab. There is no assurance that the funds will achieve their objectives. Benchmarks are current as of this printing. You cannot invest directly in the benchmark. The VRS Board and the Plans investment managers may impose restrictions and/or fees that discourage investment trading that could have an adverse impact on the management of a fund, other participants or clients of the fund s management.

TARGET DATE PORTFOLIOS A SIMPLE WAY TO SAVE FOR RETIREMENT Target date portfolios offer the ease and convenience of a professionally managed, diversified portfolio in one easy step. While target date portfolios offer a simple investing solution, you should continue to monitor your Plan account and increase contributions to stay on track with your retirement objectives. A Portfolio That Evolves Over Time Professionals make the diversification, asset allocation and rebalancing decisions for the target date portfolios. They are constructed to provide broad diversification so you typically only need one portfolio. Picking Your Portfolio Choose the target date portfolio whose target date is closest to the year you expect to begin withdrawing money from your Plan account. You only need one portfolio to be well diversified If your birthday is... Your Target Date Portfolio is... Target Date Portfolio The asset mix changes automatically over time On or before 1950 On or between 1951 and 1952 On or between 1953 and 1957 On or between 1958 and 1962 Retirement Portfolio Target Date 2015 Portfolio Target Date 2020 Portfolio Target Date 2025 Portfolio On or between 1963 and 1967 Target Date 2030 Portfolio On or between 1968 and 1972 Target Date 2035 Portfolio On or between 1973 and 1977 Target Date 2040 Portfolio U.S. Large-Cap Stocks U.S. Small/Mid-Cap Stocks International Stocks Global Real Estate Commodities U.S. Bonds U.S. Inflation-linked Bonds (TIPS) On or between 1978 and 1982 On or between 1983 and 1987 On or after 1988 Target Date 2045 Portfolio Target Date 2050 Portfolio Target Date 2055 Portfolio Over time, the investment mix gradually shifts from a greater concentration of higher-risk investments (such as stock funds) to a greater concentration of lower-risk investments (such as bond funds). The investment mix automatically becomes more conservative as the target date portfolio approaches its target date, so you don t have to constantly worry about the mix of individual funds. Based on assumption that retirement age is 65. Mapping may change year to year. Diversification and shifting to a conservative investment mix over time helps manage risk, but does not guarantee earnings growth. As with any investment, there is risk and the potential to lose value. Although target date portfolios seek to meet different investment objectives, meeting these objectives is not guaranteed. Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets. RISK high How a Target Date Portfolio changes over time Portfolio mixes are for illustration only and do not represent the actual allocation of any Target Date Portfolio. Bond Funds Stock Funds low early years middle years target year (when you ll need the money) 1-VRS-DC-PLAN1 (1-877-327-5261) www.varetire.org

GLOSSARY OF TERMS Assets Anything owned that has monetary value or can be exchanged for monetary value (a house or car, for example). Benchmark A standard by which something can be measured or judged. Capital Money available for investment purposes. Capital Gain (or Loss) An increase (or decrease) in value of a capital asset, for example, of a stock that gives it higher (or lower) value than its purchase price. The gain is not realized until the asset is sold. Diversification Spreading your money among different types of investments, such as stocks, bonds or cash equivalents. Dividend A payment to shareholders that represents their share of a fund s or company s distributed earnings. Earnings A company s or fund s profit after paying all costs, expenses and taxes. Expense Ratio A ratio for comparing an investment option s efficiency by dividing its expenses by its net assets. Fund Fact Sheet Provides information about each core investment option. It includes information about the fund s investment objective, risks, performance and other pertinent data. Posted quarterly on the Plan website at www.varetire.org. Income Interest or dividends earned from an investment. Income is automatically reinvested in a participant s plan account. Index An unmanaged group of securities whose overall performance is used as a benchmark against which financial or economic performance may be measured, such as the S&P 500 or the Consumer Price Index. Interest Money a borrower pays to a lender as the cost of using its money, expressed as a percent per period of time. The period of time is usually one year, in which case it is called an annual rate of interest. Investment Objective/Goal A statement of the goals an investment option seeks to achieve through its investments. Generally, investors match their financial objectives with investment options that have similar goals, balanced with the investor s risk tolerance. Investment Option Performance Report (IOP) Listing of core investments available in the Plans comparing performance to benchmarks, performance over time and expense ratios. Posted monthly on the Plan website at www.varetire.org and available with your quarterly participant statement. Liquidity A market is liquid when it has a high level of trading activity, allowing buying and selling with minimum price disturbance. A liquid asset is easily turned into cash. Market Capitalization (Market Cap) The current value or price of a stock multiplied by the number of shares outstanding. For example, if a company has one million shares available and the price is $10 per share, market cap is $10 million. Principal The original amount invested, not including interest or dividends on that amount. Standard Deviation A measure of the variability of returns or prices about their mean value. Total Return Return on an investment over a specific period of time. Total return includes income and share price appreciation and depreciation. Total return assumes that all dividends and capital gains paid during the period are reinvested to buy additional shares. Volatility A measure of the dispersion of outcomes for the return on an investment; typically, this is stated as annualized standard deviation.

Easy account access, 24/7 at www.varetire.org or 1-VRS-DC-PLAN1 (1-877-327-5261): Manage your account information online or through the Plan Information Line. View, download and print account statements, including 18 months of history. Automatic account rebalancing. Reallocation of account balances. Download forms and stay up-to-date on Plan rules. Download account data to Quicken. For more information: Go to www.varetire.org. Select a plan under the Defined Contribution Plans tab. Call 1-VRS-DC-PLAN1 (1-877-327-5261): Press 1 for a Customer Service Associate, Monday Friday, 8 a.m. to 8 p.m. Eastern Time (except stock market holidays). Press 2 for a Virginia registered representative, Monday Friday, 8:30 a.m. to 5 p.m. Eastern Time (except Commonwealth holidays). For the hearing impaired: TDD at 1-877-671-3146 Representatives also are available to meet in person at 919 E. Main Street, Suite 1604 (SunTrust Building) in Richmond and visit your employer s location for group presentations, enrollment sessions and individual account reviews. 166836 3026588.G.P (3/13)