Birdville ISD 457 Plan Changes and Retirement Seminar

1. Birdville ISD 457 Plan Changes and Retirement Seminar

2. Birdville ISD Retirement Plans Remember all investing involves risk.

3. Don’t Confuse the Shield with Investments • 403(b) • 457 • 401(k) • IRA Important Note: There is no total escape from taxes. No matter which plan you use, you will eventually pay some taxes. However, the impact of taxes is usually much less with a tax deferred plan. Remember all investing involves risk.

4. Comparison: 403(b) and 457(b) Remember all investing involves risk.

5. 403(b) Tax-Deferred Savings Plan • Third Party Administrator is TCG Administrators • Voluntary, pretax or roth deferrals from paycheck • Must first select a vendor company, then a vendor investment product • Contact vendor – see TCG list or go to TRS website • Complete application with vendor – some allow online and some do not • Can make salary deferral election, indicate vendor, make payroll deduction changes, and distribution forms online • www.region10rams.org • Call (800) 943-9179 Confidential and proprietary—for the exclusive use of authorized recipients only. All investing involves risk and past performance is not a guarantee of future returns.

6. Approved 403(b) Vendors

7. Birdville ISD 457 Changes • Birdville ISD is moving to TCG Administrators as the TPA and TCG Advisors as the RIA. Assets will be held by Matrix Trust the plan custodian • Assets moving from Security Benefit during blackout period from May 29, 2019 through June 10, 2019 • You can set up your account online at tcgservices.com and make investment elections at any time • If no election is made before the funds are received from Security Benefit the money will be invested in the default investment which is the Signature portfolio Remember all investing involves risk.

8. Region 10 ESC: 457(b) Retirement Plan • High quality no-load and load-waived mutual funds • Education provided by a financial advisor • Full disclosure of fees • No surrender charges or other penalties to transfer funds • Managed portfolio or self-directed investment options • Fiduciary protection • Investment Advisory Committee made up of superintendents and CFOs from participating districts meet quarterly to review all investments and plan related information Remember all investing involves risk.

9. RAMS 457(b) Plan Investments • 30+ Mutual Funds and Target Date Funds: Choose own allocation • High Quality, No-Load and Load-Waived • Low Cost Funds • 6 Model Portfolios — No Additional Fees • Preservation • Conservative • Moderately Conservative • Signature Portfolio – Default Option • Growth • Aggressive Growth Important: All investments involve risk. Evaluate every investment carefully before you invest your money.

10. Portfolio Options Important: All investments involve risk. Evaluate every investment carefully before you invest your money.

11. Portfolio Returns as of 3/31/2019

12. 457 Plan Fees • Administration Fee of $22.00 and 0.25% per year asset fee • Advisory Fee of 0.42% per year asset fee • Custodial Fee of 0.10% per year asset fee • Region 10 plan coordination Fee of 1.20 per year • Total Fees are $23.20 and 0.77% annually Important: All investments involve risk. Evaluate every investment carefully before you invest your money.

13. The Fee Effect Balance based on 6% earning net of fees with $200 monthly contributions for 20 years at the beginning of the month. Actual rate of return is not guaranteed and is for illustration purposes only. Remember that all investing involves risk. Remember all investing involves risk.

14. FinPath – Financial Wellness • Learning Modules: Cover a wide range of financial topics that keep users engaged and provide non-biased advice on how to manage their finances. • Highlights Include:  • 25+ self-guided modules • 10-15 minutes to complete • Available in Spanish  • Mobile-friendly platform • Planning Toolkit: Conducts a digital assessment of each participant’s unique financial situation and provides actionable steps to take that help improve their financial health. • Highlights Include:  • Complete analysis financial picture • Realistic actionable items • Library of information blogs • Mobile-friendly platform • Advisor Support: Advisors will provide ongoing support and assistance to ensure participants have a trusted resource to reach out to in times of need. • Highlights Include:  • Workshops focused on topics most important to employees • Meetings in person or online • Dedicated bilingual advisors • Support via phone, email, and chat

15. Key to Success: Diversification The figure shows a breakdown of factors that account for variations in portfolio returns. Source: Determinants of Portfolio Performance (Brinson, Hood, Beebower, 1986) Remember all investing involves risk.

16. Beware of Educator Abuses • Excessive hidden fees • Inappropriate types of investments • Lack of monitoring of investments • Life insurance as an investment • Pension “maximization” • Annuity riders • Investing the lump sum to “beat” TRS Remember all investing involves risk.

17. Partial Lump Sum Option (PLSO) • Possible Reasons to Do • Poor Health • Estate and Critical Need for Heirs (e.g., disabled child) • Other Estate Needs — Guarantees money to heirs instead of reversion to retirement system at death • No Savings Going into Retirement • High Debt • Reasons Not to Do • You will not be able to invest the money and beat the Retirement System • Pay Actuarial Cost for funds; Usually have to earn minimum Net 11.00% if try to match State — Can you do this with no risk?? • You have not planned for inflation and budget in retirement, so your income runs short later • You will be tempted (and give in) to spend the money you planned to save • Note Partial Lump Sum (PLSO) Eligibility • 5 Year Average — Rule of 90 • 3 Year Average — Rule of 80 Remember all investing involves risk.

18. TRS Pension & the Income Gap Remember all investing involves risk.

19. But... Can You Afford to Retire? • Factors to consider BEFORE you retire • Inflation • Life Expectancy • Expenses • Do a retirement budget and live on it for 3 months before you retire • Savings • Healthcare

20. TRS Vesting – Key Dates Became a TRS member: BEFORE September 1, 2007 AND had 5 Years of Service – Rule of 80 AFTER September 1, 2007 — Minimum age 60 to retire and receive unreduced benefits AFTER August 31, 2014 — If you are not Vested (5 years) — Minimum age 62 to retire and receive unreduced benefits Remember all investing involves risk.

21. Grandfathered vs Non-Grandfathered Remember all investing involves risk.

22. Sample TRS Form Remember all investing involves risk.

23. TRS Retirement Formula Years of Service x Average 3/5 Highest Years of Income Maximum Benefit State Factor 2.3% x = $60,000 Example Years of Service: 30 State Multiplier (2.3%): 69 % Average Income: $60,000 Maximum Benefit: $41,400 31 Gross Income $41,400 Retire at Age 60 Remember all investing involves risk.

24. Taking Aim at the Target Investment Needed to Replace Difference of$18,600 Annually(TRS Benefit vs. Pre-Retirement Income):$300,224* *Assumptions include a lump sum invested at 5% interest, with annual amount paid at beginning of each year for 30 years. This rate is assumed for illustration purposes only and is not guaranteed. Remember all investing involves risk.

25. Taking Aim at the Target Assumes an 6% annual return after fees and expenses for illustration purposes only, not guaranteed. Remember all investing involves risk.

26. Inflation vs TRS TRS does NOT have Cost of Living Adjustments (COLA) Inflation (2.5%) vs. TRS Income (0%) Remember all investing involves risk.

27. Ways to Maximize Your TRS • Increase Salary — Good Luck! • Increase Years of Service Credits • Work longer • Purchase Service Credits • Types of Service Credits • Withdrawn, Out-of-State, Military, Unreported or Substitute, etc. • Cost varies depending on type of service • Contact TRS for cost estimate Remember all investing involves risk.

28. Types of Service Credits • Estimated cost can be obtained by going to your MyTRS account or contacting TRS for actual cost • Withdrawn Service • Cost: Amount withdrawn plus 8% annual interest • Unreported & Substitute Service • Cost: Actuarial cost • Military Service • Purchase up to 5 years • Cost basis dependent on when military time was served (+) 8% annual interest • Out-of-State Service • Cost: Actuarial cost • May purchase 1 year of service credit for each year earned under TRS — up to 15 years • If the service used will also be used for a pension in another retirement system, then the service purchase is limited to 5 years Remember all investing involves risk.

29. Important TRS RulesYou Need to Know Remember all investing involves risk.

30. TRS Computation Year To earn a year of service credit, you must work in a TRS-eligible position for: • A minimum of 90 days; or • The full fall semester in the last year before you retire • Remember that the TRS year is now 9/1 – 8/31 for everyone—even 12 month employees Remember all investing involves risk.

31. Returning to Work After Retirement • Return to work in TRS covered position with no penalty • If retired and out of TRS covered work for 12 consecutive months from retirement date • Surcharge for hiring retirees still must be paid • Can also return to work and not lose annuity if work ½ time • This will result in you having to restart the 12-month waiting period to qualify for the permanent 12-month exception • Examples of positions that will not require forfeiture of annuity: • Substitute • Half-time or less • Substitute and half-time in the same calendar year • Full-time with a 12 consecutive month break in service Remember all investing involves risk.

32. Common Question Is TRS Stable and Safe? Is it the Best Way to Provide Retirement for Educators? • Yes • System is over 80.2% funded • System is actuarially sound and can pay benefits through 2075 with no additional funding • System is mandated and governed by the Texas Constitution • TRS is also the most efficient system for providing pension benefits Source: TRS Comprehensive Annual Reports August 31, 2013 and 2014, TRS Pension Benefit Design Study 9/1/2012, and TRS publication “A Great Value for All Texans” Remember all investing involves risk.

33. Social Security Issues Remember all investing involves risk.

34. Remember your TRS Annuity is never reduced by Social Security! Remember your TRS Annuity is never reduced by Social Security! Remember all investing involves risk. Remember your TRS Annuity is never reduced by Social Security!

35. Comparison SS Service Credits vs. Years of Substantial Earnings • Service Credits under Social Security (SS) • Eligible for 4 credits per year • Total of 40 credits to qualify for a benefit • For 2017, received 4 credits if earned $5,200 • Year of Substantial Earnings • Higher income number ($23,625 for 2017) • ay accumulate all Service Credits under SS without earning Years of Substantial Earnings Remember all investing involves risk.

36. Social Security Considerations • 2 Regulations • Government Pension Offset (GPO) • Applies to member’s SPOUSAL Social Security benefits • (SSA Pub No. 05-1007) • Windfall Elimination Provision (WEP) • Applies to member’s OWN Social Security benefits • (SSA Pub No. 05-10045) • www.ssa.gov • Periodically bills are filed to repeal GPO and WEP at Federal level — very costly to repeal Remember all investing involves risk.

37. Government Pension Offset: Spousal Benefit • You are eligible for your spouse’s benefit if you retire from an SS-covered and TRS-covered position • Current Law: You have to be employed by an SS-covered District for your last 60 months to be eligible • Two-thirds of your TRS Annuity benefit will be subtracted from your spousal SS benefit Remember all investing involves risk.

38. GPO Example: Spousal Benefit • TRS Pension — $2,100 • Spousal SS Benefit — $1,000 • Subtract 2/3 of TRS benefit from eligible SS benefit SS Benefit $1,000 — (2/3 of $2,100) - $1,400 = - $ 400 TRS Member is not eligible for spousal benefit, but receives full TRS annuity • TRS Pension — $2,100 • Spousal SS Benefit — $1,600 • Subtract 2/3 of TRS benefit from eligible SS benefit SS Benefit $1,600 — (2/3 of $2,100) - $1,400 = $ 200 TRS Member is eligible for spousal benefit of $200 plus full TRS annuity Remember all investing involves risk.

39. Windfall Elimination Provision: Your Benefit • Does NOT reduce TRS Pension Benefit • Effects employees who are eligible for their OWN government/state pension and Social Security • Uses a factor to calculate your SS benefit income based on ‘Years of Substantial Earnings’ • Different than ‘Service Credits’ under SS Remember all investing involves risk.

40. Windfall Elimination Provision: Your Benefit • 1986 $7,875 • 1987 $8,175 • 1988 $8,400 • 1989 $8,925 • 1990 $9,525 • 1991 $9,900 • 1992 $10,350 • 1993 $10,725 • 1994 $11,250 • $11,325 • 1996 $11,625 • 1997 $12,150 • 1998 $12,675 • 1999 $13,425 • 2000 $14,175 • 2001 $14,925 • 2002 $15,750 • 2003 $16,125 • 2004 $16,275 • 2005 $16,725 • 2006 $17,475 • 2007 $18,150 • 2008 $18,975 • 2009 $19,800 • $19,800 • $19,800 • $20,475 • $21,075 • $21,750 • $22,050 • $22,050 • $23,625 • Year Substantial earnings • 1968–1971 $1,950 • 1972 $2,250 • 1973 $2,700 • 1974 $3,300 • 1975 $3,525 • 1976 $3,825 • 1977 $4,125 • 1978 $4,425 • $4,725 • 1980 $5,100 • 1981 $5,550 • 1982 $6,075 • 1983 $6,675 • 1984 $7,050 1985 $7,425 Years of substantial earnings Percentage 30 or more 90 percent 29 - 85 percent 28 - 80 percent 27 - 75 percent 26 - 70 percent 25 - 65 percent 24 - 60 percent 23 - 55 percent 22 - 50 percent 21 - 45 percent 20 or less 40 percent* *Actual Reduction cannot be greater than 50%. With 20 or less years, the maximum reduction for 2017 is $442.50. Remember all investing involves risk.

41. Your Social Security Statement • Go online to www.ssa.gov and set up your online account to see your record, apply for benefits, etc. • Do not go to an SS office if you can avoid this Remember all investing involves risk.

42. YourEstimatedBenefits Your Estimated Benefits Remember all investing involves risk.

43. TRS Annuity Options • Standard Annuity • Maximum benefit for retiree’s life only • Option 1: 100% Joint Survivor • Reduced annuity, payable for retiree’s life with continuous payments for beneficiary’s life. If beneficiary pre-deceases, retiree’s annuity is increased to standard annuity amount • Most common, typically 8-13% reduction from Standard Annuity • Option 2: 50% Joint Survivor • Reductions range from 4-8% based on same age beneficiary Remember all investing involves risk.

44. TRS Annuity Options • Option 3: 60 Month Period Certain • Reduced annuity, payable for retiree’s life with annuity payments guaranteed for a minimum of 60 months • If retiree dies before 60th payment, beneficiary will receive the remaining payments • Typically 1-2% reduction from Standard Annuity • Option 4: 120 Month Period Certain • Typically 1-4% reduction from Standard Annuity • Option 5: 75% Joint Survivor • Reductions range from 6-12% based on same age beneficiary Remember all investing involves risk.

45. Longevity Risk Remember all investing involves risk.

46. Retirement Checklist • Become educated • Consult handbook, online tools & videos or visit counselor • Contact TRS 6 months prior to retirement date to submit a request for an estimate and packet • TRS Form 18 • Verify & complete any service purchase options • Complete documents and submit copies of birth records for you and beneficiary • TRS Form 30 • Retirement Date • Payment Options • Beneficiary Designation Remember all investing involves risk.

47. Retirement Checklist • Evaluate TRS-Care Options • Terminate employment by effective date • Collect Pension • 1st payment is due the 1st business day of the month following first calendar month of retirement • Example: May 31st retirement, June wait, July 1st (or first business day) check arrives. Remember all investing involves risk.

48. Important Disclosures TCG Advisors is a registered investment advisor regulated by the U.S. Securities and Exchange Commission (SEC) and registered municipal advisor, subject to the Rules and Regulations of the Investment Advisor Act of 1940 and the rules of the Municipal Securities Rulemaking Board (MSRB), and is a part of TCG Group Holdings, LLP. Registration does not imply a certain level of skill or training. TCG Advisors’ parent company, TCG Group Holdings, LLP, owns and operates several other entities which provide various services to employers across the U. S. Those affiliates (wholly‐owned subsidiaries of TCG Group Holdings, LLP) sometimes provide services to TCG Advisors’ Clients. These affiliates are Total Compensation Group Consulting, LP; TCG Administrators, LP (f/k/a JEM Resource Partners, LP); TCG Benefits (f/k/a The Paragon Group, LP; Paragon National, LP; and Paragon Benefits, LP, collectively). The business activities of these companies are discussed in its ADV Part 2A. TCG Advisors is located in Austin, Texas, and a copy of its Form ADV Part 2 is available upon request. This presentation is not authorized for use as an offer of sale or a solicitation of an offer to purchase investments. This presentation is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, or as an offer to provide advisory or other services in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Past performance may not be indicative of any future results. No current or prospective client should assume that the future performance of any investment or investment strategy referenced directly or indirectly in this presentation will perform in the same manner in the future. Different types of investments and investment strategies involve varying degrees of risk—all investing involves risk—and may experience positive or negative growth. Nothing in this presentation should be construed as guaranteeing any investment performance. Remember all investing involves risk.

49. Important Disclosures (continued) An investment in the plans discussed will involve a significant degree of risk, and there can be no assurance that the investment objectives will be achieved or that an investment therein will be profitable. Investors will experience individual returns that vary materially from those illustrated in this presentation depending on various factors, including but not limited to, the timing of their investment, the level of fees, and the effects of additions and withdrawals from their capital accounts. Past performance is not necessarily indicative of the future performance or the profitability of an investment in a plan. This presentation includes forward-looking statements. All statements that are not historical facts are forward-looking statements, including any statements that relate to future market conditions, results, operations, strategies or other future conditions or developments and any statements regarding objectives, opportunities, positioning or prospects. Forward-looking statements are necessarily based upon speculation, expectations, estimates and assumptions that are inherently unreliable and subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements are not a promise or guaranty about future events. • Any discussion of liquid or illiquid investments is qualified by the fact that the liquidity of an investment depends largely on market conditions, which change from time to time. An investment that is currently liquid could prove to be completely or substantially illiquid at any time in the future. No assurances can be given regarding the time at which it may be possible or reasonably practical to sell any investment, regardless of the degree of liquidity or illiquidity currently associated with the investment. Any statements about the likely timing for the future disposition or maturity of any investment or group of investments are forward-looking statements that are inherently unreliable and should not be relied upon for any purpose. • The projections or other information generated herein regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There are frequently substantial differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Remember all investing involves risk.

50. Thank You Scott Hauptmann & John Fowler 900 South Capital of Texas Highway, Suite 350 Austin, Texas 78746 512.600.5230 www.tcgservices.com Remember all investing involves risk.