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HomeMy WebLinkAbout05.d.1)a) Action Summary-Finance Committee 2-24-14Central )4) Costa Sanitary District REGULAR MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT FINANCE COMMITTEE ACTION SUMMARY Member Nejedly Member Pilecki (Alternate) Monday, February 24, 2014 3:00 p.m. Executive Conference Room 5019 Imhoff Place Martinez, California BOARD OF DIRECTORS. DAVID R. WILLIAMS President MICHAEL R. MCGILL President Pro Ten; PAUL K CAUSEY JAMES A. NEJEDLY TAD J. PILECKI PHONE. (925) 228 -9500 FAX. (925) 372 -0192 www.centralsan.org PRESENT: Member Jim Nejedly, Member Tad Pilecki (Alternate), Finance Manager Thea Vassallo, Finance Administrator Todd Smithey, Director of Operations Curt Swanson, Environmental Services Division Manager Danea Gemmell (left after Item 9.), Senior Engineer Thomas Brightbill (left after Item 9.), ICMA -RC Client Portfolio Manager Walid Refai (left after Item 3.), ICMA -RC Regional Vice President Manager Dennis Duarte (left after Item 3.), ICMA -RC District Representative Kim Hammond (left after Item 3.), Accounting Technician III David Rolley (left after Item 3.), and Assistant to the Secretary of the District Donna Anderson Call Meeting to Order Acting Chair Nejedly called the meeting to order at 3:00 p.m. 2. Public Comments None. *3. Receive presentation from Walid Refai, ICMA -RC's Client Portfolio Manager, of overview and discussion of the ICMA -RC Investment portfolio and receive update from staff on the status of the Deferred Compensation Consolidation. Mr. Refai, who oversees the investments in the District's benefit plans, distributed and explained a handout (attached) containing information about ICMA -RC's role as a fiduciary to Vantage Trust Company. He explained that their investment Finance Committee Action Summary February 24, 2014 Page 2 philosophy focuses on the long -term investment solutions with controlled risk to achieve investment goals. He also reviewed the various investment fund options, historical performance of those funds, the criteria for selection of fund managers, and asset allocation, after which the 1CMA -RC representatives responded to several questions from Chair Nejedly and Member Pilecki. Finance Manager Thea Vassallo said consolidation of the management of the District's 457 and 401(a) Deferred Compensation Plan assets under one carrier, ICMA -RC, should be complete by the end of March. Ms. Hammond said she was looking forward to bringing financial planning services to those employees whose funds are being consolidated into 1CMA -RC from Nationwide and MassMutual (previously Hartford). COMMITTEE ACTION: Received information. 4. Expenditures a. Review Expenditures COMMITTEE ACTION: Reviewed and recommended Board approval. 5. Old Business a. Review staff's response to questions regarding an expenditure at the previous meeting: Member Pilecki said the response did not fully answer the question raised by Member Causey at the last meeting. Ms. Vassallo said she would look into it further. COMMITTEE ACTION: Reviewed staff's response and requested further clarification of the response. 6. Risk Management a. Review Loss Control Report and discuss outstanding claims Finance Committee Action Summary February 24, 2014 Page 3 COMMITTEE ACTION: Reviewed the report and discussed outstanding claims. b. Discuss new claims, if any COMMITTEE ACTION: None. 7. Review Ten -Year Plan goals and assumptions Finance Administrator Todd Smithey reviewed the assumptions booklet that accompanied the agenda packet, focusing primarily on the Scenario Summary Table on p. 17 of the booklet. He asked the Committee Members if they desired any further information from staff before the Financial Planning Workshop on March 6, 2014. Member Pilecki suggested that two additional scenarios be prepared. a. One scenario showing a 5 percent annual reduction in Operations and Maintenance (O &M) expenses; and b. Another scenario combining a 5 percent annual reduction in O &M expenses with a reduced annual payment toward the District's unfunded actuarial accrued liability (UAAL) from $10 million to $5 million. The Committee Members thanked staff for compiling the complex financial information and assumptions into such an informative and comprehensible document. COMMITTEE ACTION: Reviewed the Ten -Year Plan goals and assumptions and requested that staff prepare two additional scenarios for presentation at the upcoming Financial Planning Workshop: (1) showing a 5 percent annual reduction in O &M expenses; and (2) combining the 5 percent annual reduction in O &M expenses with a reduced annual payment toward the UAAL from $10 million to $5 million. 8. Review Capacity Fee Proposal for Fiscal Year 2014 -15 in response to a question from Member Pilecki, Environmental Services Division Manager Danea Gemmell said capacity fees will be reviewed as part of the upcoming cost -of- service study. COMMITTEE ACTION: Reviewed and recommended Board approval. Finance Committee Action Summary February 24, 2014 Page 4 9. Review Environmental and Development - Related Rates and Charges Proposal for Fiscal Year 2014 -15 COMMITTEE ACTION: Reviewed and recommended Board approval. 10. Review January 2014 Financial Statements and Investment Reports Member Pilecki observed that General Manager Roger Bailey, in presenting the preliminary rate - setting information at the February 6, 2014 Board meeting, used a budget -to- budget comparison to arrive at an anticipated $7 -8 million drawdown from reserves for the Fiscal Year ending 2013 -14. However, he noted that combining all the variances indicated in the current January financial reports with lower projected expenditures, the positive variance will be pretty close to $10 million by year end. COMMITTEE ACTION: Reviewed and recommended Board approval. 11. Announcements a. Next meeting scheduled for March 10, 2014 at 3:00 p.m. COMMITTEE ACTION: Received the announcements. 12. Suggestions for future agenda items None. 13. Adjournment— at 4:10 p.m. * Attachment u ICMA Building Retirement Securiq 5 /j n A 3. (Handouf) Central Contra Costa Sanitation District ICMA=RC Due Diligence and Oversight of the VantageTrust Funds ,wri ICMA lffdlrinic Xeuem"'P .5h er�fr ICMA lhdldit {q Red rrnrrrtt Sawity ICMA -RC is a Fiduciary to VTC ICMA -RC, in its capacity as a registered investment adviser to VTC, provides oversight and due diligence of the VT Funds 0 ICMA -RC is a fiduciary to VTC ® ICMA -RC does not act as an investment adviser to plans or plan sponsors 0 ICMA -RC is not a fiduciary to plans or plan sponsors 3 Specializing in Retirement - Focused Investing Objective Provide successful, long -term investment solutions with controlled risk to achieve investment goals Investment Philosophy We believe investment success comes from prudent decision - making characterized by: Independent Thought is Teamwork of Experts Forward- Looking Analysis and Process 1 Ir ICMA Na!ldia� M' •encurrn/ .M are {e Fund Selection & On -going Due Diligence* We begin with the universe of leading firms. Based on performance, screens and external research are used to focus attention on strong candidates. ire detailed research and analysis are performed to identify leading achievers. ;t with people at multiple levels within the firms, and examine the methods ; results. Final Selection Funds are selected for their expected future results and their fit within the lineup and optimization strategy. * Specific to Vantagepoint subadvisers and VT Funds with underlying third -party mutual funds. Does not apply to Open Architecture options, which are selected at the sole discretion of the Plan Sponsor. ICMA Haddur Neirrvrt: rri .k•- mwy dC�y' { c Y :G wS �y�`Cr•�`� � s ` ICMA (k ilding Rahrnre r S,—i[y r, VT Fund Selection & Removal Philosophy A combination of several qualitative and quantitative factors are used in the ICMA -RC fund due diligence process when deciding to add or remove a VT fund Performance overtime • Appropriate market benchmarks • Peer category performance rankings Risk • Risk and volatility statistics • Peer category risk rankings U Investment changes • Style changes • Changes in a fund's portfolio management team • Significant changes in asset turnover • Portfolio holdings profile Fund fees Fit in the overall ICMA -RC funds line -up M �ltr �.�r} � ✓ 7rI. ,1 zi .�, K � IC MA Bxih iug Rrrirownt S'vaarBy Monitoring Managers .... MN O" � r r r • Multi- factor risk analysis Experienced, insightful and • Style adherence passionate investors • Correlation and • Investment - driven culture liquidity analyses • Strong compliance standards • Consistency of • Disciplined, well- executed out - performance investment strategy • Performance attribution 7 Current Plan Investment Options ICMA WidinA Rru —n-t Srnew.J ICMA -RC's Standard Fund Line-up' `sM et -Date /Risk Investing Customized Investing As of December 31, 2013 1 will begin to make gradLial '� I ,� .a r, . , $� T withdrawals in the year... � custom line -up. . Milestone Retirement Fund9,10 Milestone 2010 Fund9,10 Milestone 2015 Fund9j0 Milestone 2020 Fund9,10 Milestone 2025 Fund9,10 Milestone 2030 Fund9,10 Milestone 2035 Fund9,10 Milestone 2040 Fund9,10 Milestone 2045 Fund9,10 Milestone 2050 Fund9j0 1 want to manaae risk... Conservative Growth10 Traditional Growth10 jLong -Term Growth10 L All- Equity Growth10 — VALUE BLEND GROWTH Vantagepoint.Equity Income Large VT Vantagepoint Growth & Income VT Vantagepoint Growth VT Invesco Diversified Dividend VT Vantagepoint Broad Market Index VT T. Rowe Price@ Growth13 VT AllianzGl NFJ Dividend Value VT Vantagepoint 500 Stock Index VT Fidelity Contrafund® VT Oppenheimer Main Street VT Calvert Equity Portfolio VT Vantagepoint Select Value^ VT Vantagepoint Mid /Small Co Index4 VT Vantagepoint Aggressive VT Goldman Sachs Mid Cap Value4 Opportunities4 VT Harbor Mid Cap Growth4 VT TimesSquare Mid Cap Growth4 Small Cap VT Vantagepoint Discovery4 VT Oppenheimer Discovery" VT T. Rowe PriceO Small Cap Value4,13 PROTECTED INFLATION VT Vantagepoint Inflation Protected VT Vantagepoint Core Bond Indexe VT PLUS Fund Securities8 VT PIMCO Total Return Bond8 VT Cash Management„ VT PIMCO High Yield Bond8 INCOME GUARANTEED LIFETIME VT Fidelity Puritan® VT Retirement IncomeAdvantagel SECTOR INTERNATIONAL VT Nuveen Real Estate Securities8 VT Vantagepoint Internationals VT Fidelity Diversified Internationals VT Harbor Internationals VT Vantagepoint Overseas Eq Indexs ICMA -RC provides plan sponsors fund information to assist them in meeting their fiduciary responsibility in managing the plan. The plan sponsor retains the obligation to prudently select and monitor the investment options available to plan participants under their plans. ICMA Ittrildi++.� Hrtin wrrtr Sr. un{F a ICMA -RC Plan Sponsor or Consultant Use Only. See disclosures at the end of presentation. 0 /1\1 1CMA Unildiq; Xuirox—r -rwity Philosophy Managing the VT PLUS Fund Preservation Liquidity ReturAw Rate The VT PLUS Fund is structured to accommodate clients' multiple conflicting objectives and needs 11 VT PLUS Fund Performance2 Ranking Universe: Hueler Stable Ualue3 - Gross Returns2 Universe Percentiles as of December 31, 2013 4.5% - 4.20% 4.0% - - 3.43% 3.5% 3.0% *3.04% 2.5% *2.59% 2.0% _ 1.5% 1.0% 1 Year 3 Year 5 Year 10 Year VT PLUS Gross Return2,' 2.59% 3.04% 3.43% 4.20% VT PLUS Net Return2 2.04% 2.48% 2.86% 3.67% ■ 11 -25th Percentile 2.17-2.37 2.68-2.81 2.99-3.39 3.91-4.15 ■ 26 -50th Percentile 1.79-2.17 2.14 - 2.68 2.65-2.99 3.58 - 3.91 51 -75th Percentile 1.49-1.79 1.96 - 2.14 2.36-2.65 3.47-3.58 ■ 76 -90th Percentile 1.34-1.49 1.74-1.96 1.96-2.36 3.21 - 3.47 The PLUS Fund Gross Return is net of fixed income manager, wrap and custodial fees, and is reported in a manner consistent with stable value industry reporting practices. Total VT PLUS Fund feev were 0.72% of assets, as disclosed in the Vantage Trust Funds Fees and Expenses document accompanying the most recently published Retirement Investment Guide, and consist of: (1) ICMA -RC and affiliate fees /expenses of 0.46% of assets, which include recordkeeping fees; and (2) fixed income manager, wrap and custodial fees of 0.26% of assets. The initial offering date of the R7 share class was October 11, 2013. As a result, performance information for the R7 share class prior to its initial offering date is the performance of the Fund's R5 share class net of fees and expenses. The R7 share class fees and expenses are 0.10% lower than the total fees and expenses of the Fund's R5 share class. Fees are subject to change due to fixed income manager, /,,^ wrap, allocation, or other changes. Periods greater than one year represent annualized performance and past performance is no guarantee of future results. ICMA 11nNJing Rewonent Sr, n iy K � r ICMA !Aril iiu� Xrtirrurcut . &amity VT Vantagepoint Milestone Funds' Retirement plans utilizing VT Funds invest indirectly in Vantagepoint and third -party funds through the VantageTrust. Vantagepoint Funds are only available to retirement plans through the VantageTrust. 13 iCMA Is"Wiig Rrii —on Sir if) VT Vantagepoint Milestone Funds Underlying Fund Design Designed with Public Sector employees in mind: i� Assume retirement age 60 years rx Glide path reaches its landing point at age 70 The Milestone Funds are diversified and invest in: Multiple asset classes: i Traditional: �i Large -Cap, Mid -Cap and Small -Cap equities i:i Fixed income focused on investment grade, IPS Non- traditional to dampen volatility: ii( GTAA, Convertibles Underlying funds have multi- manager (open architecture) structure, which seeks capable managers anywhere 14 f CMA Bvddi,kS Rrtirrx�rttt Jean il} VT Vantagepoint Milestone Funds Changing Risk over Time Representative Glide Path as of December 31, 2013 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 %4 All dated funds follow the same glide path, regardless of target year. 36% Fixed Income 55% Fixed Income 17% Multi- Strategy 20% Multi- Strategy 47% Equity 25% Equity 0 35 30 25 20 15 10 5 0 5 10 15 20 25 30 35 4 Years Until Retirement 014 Years After Retirement —► 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0°% The share values of the Milestone Funds are not guaranteed at any time, including at or after each Milestone Fund's target year, which is the year when investors expect to retire and begin making gradual withdrawals. There is no guarantee that a Milestone Fund will provide adequate income at and through an investor's retirement or that the investor will have adequate savings for retirement. The Milestone Funds' allocations change over time. 15 VT Vantagepoint Milestone Funds Underlying Fund Allocations Target Allocations as of December 31, 2013 Greater Volatility/ More Stock Exposure Lower Volatility/ Less Stock Exposure Invest y account based on my retirement age... 13 17% L 23% I f - Milestone 2050 Fund 9/ Milestone 2045 Fund Milestone 2040 Fund Milestone 2035 Fund Milestone 2030 Fund Milestone 2025 Fund Milestone 2020 Fund 444 Milestone 2015 Fund Milestone 2010 Fund r•, Milestone Retirement Income Fund '0 Shorter Time Horizon/ More Conservative Investment Mix Fixed Equity Multi- Strategy Longer Time Horizon/ More Aggressive Investment Mix Subje .-t to the supervision of the Fund's Board of Directors, Vantagepoint Investment Advisers, LLC ( "VIA "), the investment adviser to each Fund, may alter the Target Allocations at its discretion. TaFget Allocations are as of the date above and the actual allocations may be different. Due to rounding, allocations may not add up to 100 %. The share values of the Milestone Funds are not guaranteed at any time, including at or after each Milestone Fund's target year, which is the year when investors expect to retire and begin making gradual withdrawals. There is no guarantee that a Milestone Fund will provide adequate income at and through an investor's retirement or that the investor will have adequate savings for retirement. The Milestone Funds' allocations change over time. AAq I UVI f3ailAing llrmnur+.r Sivu'irr F_ VT Vantagepoint Milestone Funds Underlying Fund Allocations Target Allocations as of December 31, 2013 Equity Mix( %) / Multi- Strategy( %) / Fixed Income( %): EQUITY Underlying Funds Emerging Markets Internationals &N Mid /Small Company Index4 Growth Growth & Income 0 Equity Income MULTI - STRATEGY Underlying Funds Diversifying Strategies5,6,7 FIXED INCOME Underlying Funds Inflation Protected Seca Core Bond Index? Low Duration Bond' 25/20/55 45/18/37 53/17/30 62/15/23 70/13/17 78/11/11 87/7/6 Retirement Income 2010 2015 2020 2025 2030 2035 100% 0% 93/215 951015 951015 2040 2045 2050 Subject to the supervision of the Fund's Board of Directors, Vantagepoint Investment Advisers, LLC ( "VIA "), the investment adviser to each Fund, may alter the Target Allocations at its discretion. Target Allocations are as of the date above and the actual allocations may be different. Due to rounding, allocations may not add up to 100 %. The share values of the Milestone Funds are not guaranteed at any time, including at or after each Milestone Fund's target year, which is the year when investors expect to retire and begin making gradual withdrawals. There is no guarantee that a Milestone Fund will provide adequ income at and through an investor's retirement or that the investor will have adequate savings for retirement. The Milestone Funds' allocations change over time. fCM/0 11"ilrihx Rcdreu+rr+I S"n IF 1.0% 2.0% 2.0 %; - 2.0 °I °_ _ : ^ / +_ -1. -T76a /1 3:Q°o 1 a 0 9.8% 11.6% 13.3% 14.1% 15.4% 16.0% 16.0% 7.7% I ° ! 10.2 /0 13.00 16.5% ° 19.3 / 20.00 20.00 /` 17.0% 19.0% c 20.1% 22.3% 9.0% 23.8% " 25.2% o ' 66/a! i 26.6 %' 31.0 %' 8.2 %, 27.4% 27.4% i I 12.5 I ° 14.2 /o' i 7% 1.2 /o 12.4%1 ° 8.a r° 4.5 %, 1 70/_ 0..7% 4,0 %j i.0 %< 5.0% Subject to the supervision of the Fund's Board of Directors, Vantagepoint Investment Advisers, LLC ( "VIA "), the investment adviser to each Fund, may alter the Target Allocations at its discretion. Target Allocations are as of the date above and the actual allocations may be different. Due to rounding, allocations may not add up to 100 %. The share values of the Milestone Funds are not guaranteed at any time, including at or after each Milestone Fund's target year, which is the year when investors expect to retire and begin making gradual withdrawals. There is no guarantee that a Milestone Fund will provide adequ income at and through an investor's retirement or that the investor will have adequate savings for retirement. The Milestone Funds' allocations change over time. fCM/0 11"ilrihx Rcdreu+rr+I S"n IF VT Vantagepoi nt Milestone Funds Underlying Subadvisers As of December 31, 2013 1. Artisan Partners 2. Atlanta Capital Management 3. Barrow, Hanley, Mewhinney & Strauss 4. BlackRock Financial Management Inc. 5. Calamos Advisors 6. Columbus Circle Investors 7. Fiduciary Management 8. GlobeFlex Capital 9. Mellon Capital Management* 10. Mondrian Investment Partners Limited 11. Pacific Investment Management Co. 12. Payden & Rygel* 13. Shenkman Capital Management 14. Southeastern Asset Management 15. STW 16. T. Rowe Price Associates* 17. Victory Capital Management 18. Walter Scott & Partners* 19. Wellington Management Co. 20. Westfield Capital Management * Multiple Mandates ICMA lhdldfinp RrIn IN/H/ brrruvty 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Capital Markets Overview2 As of December 31, 2013 0 NT O Source: Morningstar N 00 � ti N \ I o r ti c\ I` o e- o ° r - LO .: w Q4'13 1 Year 3 Years 5 Years 10 Years • Bonds: Barclays U.S. Aggregate Index High Yield Bonds: Barclays High Yield Index • Large Stocks: S &P 500 Index ■ Small Stocks: Russell 2000 Index Int'l Developed Market Stocks: MSCI EAFE Index Net ® Emerging Market Stocks: MSCI Emerging Mkts Index Net Periods greater than one year represent annualized performance and past performance is no guarantee of future results. ,H (CMA Haildine ft ..... n- w um N N o 0 CO I- _.. o � � _ O N I- o \ �} N M I� Co 00 01 Lq LO � j N d _. M GO M r 0 NT O Source: Morningstar N 00 � ti N \ I o r ti c\ I` o e- o ° r - LO .: w Q4'13 1 Year 3 Years 5 Years 10 Years • Bonds: Barclays U.S. Aggregate Index High Yield Bonds: Barclays High Yield Index • Large Stocks: S &P 500 Index ■ Small Stocks: Russell 2000 Index Int'l Developed Market Stocks: MSCI EAFE Index Net ® Emerging Market Stocks: MSCI Emerging Mkts Index Net Periods greater than one year represent annualized performance and past performance is no guarantee of future results. ,H (CMA Haildine ft ..... n- w um VT Vantagepoint Milestone Funds Morningstar® Rankings as of December 31, 2013 (1= highest, 100= 1owest) Vantagepoint Retirement Milestone Milestone Milestone Milestone Milestone Milestone Milestone Milestone Milestone Funds Income 2010 2015 2020 2025 2030 2035 2040 2045 2050 Morningstar" Retirement Target Date Target Date Target Date Target Date Target Date Target Date Target Date Target Date Target Date Category Income 2000 -2010 2011 -2015 2016 -2020 2021 -2025 2026 -2030 2031 -2035 2036 -2040 2041 -2045 2046 -2050 1% of 218 1% of 180 1% of 202 5% of 222 4% of 181 6% of 182 2% of 133 12% of 178 9% of 222 A 11% 134 10% of 164 15t Quartile o of 153 14 /o ° of 181 12 /o A13/o ° of 186 of A 21 % of 186 • 18% of 134 ♦ 24% of 101 .28% of 140 AJ28% of 141 A 32% of 168 2nd Quartile 53% of 293 3rd Quartile Ak 65% of 271 ® 82% of 238 4th Quartile A 75% of 124 A52% of 114 '•49% of 168 .50% of 101 1 -Year Rank & 3 -Year Rank L 5 -Year Rank Number next to each triangle represents a percentile rank within the appropriate Morningstar style category universe of funds. The percentile ranking is based on Total Return (including the effects of fee waivers) relative to all funds in the same Morningstar category. The highest (or most favorable) percentile rank is 1 and the lowest (or lea3t favorable) percentile rank is 100. The top - performing fund in a category will always receive a rank of 1. Past performance is no guarantee of future results. 1CMA Jlui4Grt� Haaircnrcei NN ­4 Disclosure Please read Making Sound Investment Decisions: A Retirement Investment Guide and the accompanying VantageTrust Fund Fees and Expenses document ( "Guide ") carefully for a complete summary of all fees, expenses, investment objectives and strategies, and risks. Investors should carefully consider this information before investing. For a current Guide, contact ICMA -RC by calling 800 - 669 -7400 or log into your account at wwwicmarc.org. The performance quoted represents past performance, is no guarantee of future results, and is annualized for periods greater than one year. Investment retums and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance shown. For current performance, contact ICMA -RC by calling 800 - 669 -7400 or by visiting www.icmarc.org, The Hueler Analytics Stable Value Pooled Fund Comparative Universe represents the performance returns of actual stable value pooled funds, and its Index is the stable value industry benchmark used by many institutional investors, consultants, advisors and plan sponsors for monitoring stable value pooled funds. Rankings are derived by ICMA -RC from data provided by Hueler Analytics, Inc., a technology and research firm covering stable value products that is not affiliated with ICMA -RC. ICMA -RC does not independently verify Hueler Analytics, Inc. data. Gross returns used in the Universe and in the Rankings do not include plan administration fees, adviser expenses, or other stable value fund costs — actual performance experienced by participants would be commensurately lower. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top - performing fund in a category will always receive a rank of 1. As of December 31, 2013, the universe contained 15 funds with 1 -year returns, 15 funds with 3 -year returns, 15 funds with 5 -year returns, and 14 funds with 10 -year retums. Past performance is no guarantee of future results. Funds that invest in small and /or mid -sized company stocks typically involve greater risks, particular in the short -term than those investing in large, more established companies. Foreign investments are subject to more risks not associated with domestic investments (i.e. currency, economy and political risks.) Funds that concentrate investments in one industry may involve greater risks than more diversified funds, including greater potential for volatility W"�\ ICM \ Nail g Ra"'. er Sr..urrr� Disclosure Prudential Retirement Insurance and Annuity Company (Prudential), CA COA #08003, Hartford, CT. Neither Prudential nor ICMA -RC guarantees the investment performance or return on contributions to Prudential's Separate Account. You should carefully consider the objectives, risks, charges, expenses and underlying guarantee features before purchasing this product. Prudential may increase the Guarantee Fee in the future, from 1.00% up to a maximum of 1.50 %. Like all variable investments, this Fund may lose value. Availability and terms may vary by jurisdiction; subject to regulatory approvals. Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Guarantees are based on Prudential's claims - paying ability. This annuity is issued under Contract form # GA- 2020 -TG WB4- 0805 -RC. ICMA -RC provides recordkeeping services to your Plan and is the investment manager of the underlying Prudential separate account. Prudential or its affiliates may compensate ICMA -RC for providing these and related administrative services in connection with the Fund. Before electing the Spousal Benefit (if available) on behalf of any beneficiary not recognized as your spouse under Federal law (a civil union partner), be aware that provisions of your plan or the Internal Revenue Code might prevent, limit or otherwise affect the ability of the beneficiary to receive the Spousal Benefit. Variable annuities are suitable for long -term investing, particularly retirement savings. ©2013 Prudential, the Prudential logo, and the Rock symbol and Bring Your Challenges are service marks of the Prudential Insurance Company of America, Newark, NJ, and its related entities, registered in many jurisdictions worldwide. Note: Participants who are interested in the VT Retirement IncomeAdvantage Fund must first receive and read the VT Retirement IncomeAdvantage Fund Important Considerations document, before investing. 8. A rise /fall in the interest rates can have a significant impact on bond prices and the NAV (net asset value) of the fund. Funds that invest in bonds can lose their value as interest rates rise and an investor can lose principal. 9. The fund is not a complete solution for all of your retirement savings needs. An investment in the fund includes the risk of loss, including near, at or after the target date of the fund. There is no guarantee that the fund will provide adequate income at and through an investor's retirement. Selecting the fund does not guarantee that you will have adequate savings for retirement. 10. The expense ratio for a 'fund of funds" includes acquired fund fees and expenses, which are expenses incurred indirectly by the fund through its ownership in other mutual funds. 11. The Cash Management Fund is invested in a single registered mutual fund, the Dreyfus Cash Management Fund. Investments in the VantageTrust Cash Management Fund are not insured orguaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Dreyfus Cash Management Fund seeks to preserve the value of the fund at $1.00 per share, it is possible to lose money by investing in the Fund. 12. Funds that short securities and use derivatives have different risk from and possibly greater than the risk associated with investing long or directly in securities and other instruments. Note that a short position loses value as the security's price increases; therefore the loss on a short sale is theoretically unlimited. There can be no guarantee that derivative strategies will work, that the instruments necessary to implement these strategies will be available or that the Fund will not lose money. Derivatives involve costs and can be volatile. In addition, any derivative that the Fund invests in may not perform as expected and this could result in losses to the Fund that would not otherwise have occurred. 13. T. Rowe Price is a registered trademark of T. Rowe Price Group, Inc. — all rights reserved. ICMA hwdd"'�: Krro.i.m.i .SarBYlfy � Questions ICMA Hai(di'tt Raiment Jhueify Thank You! • 23