ICMA Retirement Corporation

Welcome to Your Retirement Future

Many experts estimate that you'll need at least 75 to 85 percent of today's income to maintain your lifestyle during retirement.

You'll probably have Social Security and perhaps a pension from your employer. Your retirement savings may also play an important role in meeting your goals.

As a public sector employee, you have the opportunity to build your retirement investments - and reduce today's taxes - through a Section 457 deferred compensation plan.

Read further to learn how your deferred compensation plan works and why you should start investing today.¹ You'll will be introduced to ICMA-RC, created over 30 years ago by public sector employees. More than 650,000 public sector employees across the nation are committed to a secure, well-planned retirement.

How It Works

What is deferred compensation?

Deferred compensation is a program that allows you to invest today for your retirement. Federal and (in most cases) state income taxes are deferred until your assets are withdrawn, usually during retirement when you may be in a lower tax bracket.

How does deferred compensation work?

Under Section 457 of the Internal Revenue Code, you may defer each year a maximum of 100% of your "gross compensation"² or an annual dollar limit, whichever is less. The dollar limits are:

Year	Contribution Limit
2005	$14,000
2006	$15,000

Participation is handled through payroll deduction so your taxes are reduced each pay period.

Our plan allows you to increase, decrease, stop and restart contributions as often as you wish, without fees or penalties, subject to your employer's approval.

What are the benefits of investing in a 457 Plan?

A 457 plan offers many benefits:

• You reduce your current income taxes while investing for retirement.
   

• Your earnings accumulate tax-deferred.
   

• You can dollar-cost average through convenient payroll deductions.³
   

• If you are 50 (or older) or within three years of your normal retirement age and already contributing the maximum to your plan, you are allowed to make additional "catch-up" contributions.
   

• It's portable. If you change jobs, you can consolidate your savings in another public sector employer's 457 plan, a qualified 401 plan, a tax-sheltered 403(b) annuity plan, or a Traditional IRA.
   

• If you retire or leave service early, there is no penalty for withdrawals.
   

• Supplemental investments are helpful in states and communities where no contribution is made to Social Security.

A Great Savings Tool

How does deferred compensation beat conventional investing?⁴

In two ways. First, deferred compensation gives you a significant tax break. In conventional investing, you pay taxes on income before you can set some aside for investing. Deferred compensation allows you to invest the full amount.

Conventional Investment Account
Total to invest		Taxes taken out		Total invested
$2,400	-	$600	=	$1,800
Taxes taken out are based on the 25% tax bracket
Deferred Compensation Account
Total to invest		Taxes taken out		Total invested
$2,400	-	$0	=	$2,400

Second, your earnings also benefit from tax deferral, as illustrated below:

Does it matter when I begin investing?

It makes a huge difference. If you begin investing $100 biweekly today and earn an average of 7 percent annually, in 20 years you'll have $11,867 available. But if you wait five years to start, your account would have only $68,675. That's a $44,000 difference in your account. Over time, compounding of earnings does most of the work for you.

How much should I contribute?

You should contribute as much as you can afford to put away for retirement, because every extra dollar you invest will have an enormous impact over the long term. Say you are 30 years old and contribute $100 biweekly into your account. At age 60, if you earned 7 percent on your investments, you would have $264,327. But if you contributed just $25 more biweekly, you would have $330,409. As the graph below shows, a little extra goes a long way toward securing your retirement.

How You Invest

What are my investment options?¹

ICMA-RC offers a wide array of investment options. Investors may choose from our own Vantagepoint Funds or other popular funds offered in the Vantage Trust Mutual Fund Series. Other funds are listed in most major newspapers.

The Vantagepoint family of funds consists of registered mutual funds including Actively Managed Funds, Index Funds, Model Portfolio Funds and target-date funds. Our funds are listed in most major newspapers.

Our Actively Managed Funds are based on a multi-management approach. Our team of investment analysts carefully select and monitor nationally-recognized investment managers, called subadvisers. By diversifying across styles, a multi-management approach is designed to continue historically competitive performance that has produced greater consistency, than a single-manger approach.

Our Index Funds provide alternative investment options for those investors who prefer funds that mirror some of the most popular investment benchmarks.

the Milestone Funds\u2122 offer an all-in-one investment strategy that changes with you as you move through the significant milestones in your life. Each fund is professionally managed with a specific target retirement date in mind. These Funds invest in various Vantagepoint Funds.

Spanning time horizons and risk levels, the Vantagepoint Model Portfolio Funds provide pre-set diversification and periodic rebalancing for the most conservative to aggressive investor. These funds invest fixed allocations in various Vantagepoint Funds.

What are the fees, minimum investments, and/or restrictions?

ICMA-RC prides itself on its competitive fee structure and publishers all fees in the Vantagepoint Funds Prospectus and Making Sound Investment Decisions: A Retirement Investment Guide. All funds offered through ICMA-RC are no-load⁵ and have no minimum investment required.

You may generally transfer your assets between funds without restriction. However, some funds may limit your ability to conduct frequent transfers to protect the interest of other investors.

Withdrawing Your Money

When can I withdraw assets from my account?

You can withdraw assets from your account under the following conditions:

• Retirement - When you retire.
• Leaving employment - When you leave your job, for any reason.
• Unforeseeable emergency - This is defined as a severe financial hardship resulting from a sudden illness, disability or accidental property loss, subject to strict IRS guidelines.
• Small balance account withdrawals - you are eligible to initiate a one-time disbursement of your account if the balance is $5,000 or less and neither you nor your employer have contributed to the account for at least two years. Your account will automatically be distributed if the balance is less than $1,000 and no contributions have been made for two years.

You may generally transfer your assets between funds without restriction. However, some funds may limit your ability to conduct frequent transfers to protect the interest of other investors.

After I leave my employer, what are my options?

When you leave your employer, you may keep the money invested in the plan, transfer ("roll over") your money to another retirement plan, including another public employer's 457 plan, a qualified 401 plan, a 403(b) plan, or a Traditional IRA, or withdraw your assets. You have the ability to take your assets with you as you move between the public, private, and educational sectors.

Does ICMA-RC offer an IRA?

Yes. ICMA-RC offers the full-featured Vantagepoint IRA, including a brokerage option.⁶ You may wish to consider consolidating your other IRA assets in the Vantagepoint IRA.¹

When is the latest I must begin receiving benefits?

You must begin receiving benefit payments no later than April 1 of the calendar year following the year you reach 70½, or the year in which you actually retire, if later.

When I retire, how do I schedule my benefit payments?

We provide some of the most flexible payment options available from any deferred compensation program. You determine the payment schedule that's right for you:

1. Periodic payments (monthly, quarterly, etc.) over a specified number of years
2. Periodic payments (monthly, quarterly, etc.) over your determined life expectancy
3. Periodic payments of a specified amount per month or per year until the account is exhausted
4. Rollover to another plan or a Traditional IRA, including ICMA-RC's Vantagepoint IRA
5. A lump-sum payment
6. Purchase of a lifetime annuity.⁷ If you choose this option, ICMA-RC on your behalf will transfer a lump-sum payment from your account to an insurance company not affiliated with ICMA-RC or your employer.

In addition, an annual automatic cost-of-living adjustment (COLA) may be elected with options A, B, and C listed above.

Once you begin receiving payments, you are able to stop and restart your payments as well as to increase and decrease them as your financial needs change.

After I leave my employer, how long do I have before I must make my benefit payment decision?

Unless your account balance is under $1,000 or you are 70½ and are required to begin withdrawing money, there is no deadline for making your payment decision. When you are ready to take a distribution, you may contact us to obtain a coy of the 457 Deferred Compensation Plan Benefit Withdrawal Packet. This packet provides information regarding requirements and procedures associated with plan withdrawals.

What happens in the event of my death?

In the event of your death, your beneficiary can take withdrawals under any schedule, as long as the time period is no longer than his/her life expectancy. Your beneficiary may choose a shorter time frame. Your beneficiary should review the ICMA-RC Beneficiary Withdrawal Packet for more information on available payment options. In most cases, these payments must begin by December 31 of the year following the year of your death. If your beneficiary is spouse, he or she may be able to postpone the beginning date, and may be able to roll the money into another retirement plan or Traditional IRA, including an ICMA-RC Vantagepoint IRA.

If you die after you started receiving benefits, your beneficiary should notify us as soon as possible so that your payment schedule can be halted while your beneficiary determines the schedule that will best suit his or her own financial needs.

When you are ready to take a distribution, you may contact us to obtain a copy of the 457 Deferred Compensation Plan Benefit Withdrawal Packet. This packet provides information regarding requirements and procedures associated with plan withdrawals.

The ICMA-RC System

What is the ICMA-RC System?

The ICMA-RC System - ICMA Retirement Corporation (ICMA-RC), VantageTrust Company, The Vantagepoint Funds and ICMA-RC Services,LLC, Vantagepoint Investment Advisers, LLC and Vantagepoint Transfer Agents, LLC - work to satisfy your retirement needs.

Your benefit from independent accounting of plan assets, a wide array of investment options, ongoing fund analysis, and more. The ICMA-RC System is designed so the assets you put away today will be there for you tomorrow.

• ICMA-RC
  
  ICMA-RC is a not-for-profit corporation founded by public service employees in 1972 with the help of the International City/County Management Association and a grant from the Ford Foundation. ICMA-RC became the first organization to offer a nationally available deferred compensation retirement program for public sector employees.
  
  ICMA-RC helps establish and maintain retirement plans exclusively for state and local government employees. ICMA-RC's principal lines of business are Section 457 deferred compensation plans, Section 401 defined contribution plans, and Individual Retirement Accounts (IRAs). ICMA-RC is an investment adviser registered with the Securities and Exchange Commission.
   
• Vantage Trust Company
  
  The Vantage Trust is a group trust that is legally separate from ICMA-RC. It provides for the commingled investment of assets of retirement plans administered by ICMA-RC. Trust assets are not subject to the claims of the creditors of ICMA-RC. The Trust, offered through VantageTrust Company, offers a range of investment funds and each fund has been designed for retirement plan investing.
  
  ICMA-RC provides investment advisory services to the Trust.
   

ICMA-RC helps establish and maintain retirement plans exclusively for state and local government employees. ICMA-RC's principal lines of business are Section 457 deferred compensation plans, Section 401 defined contribution plans, and Individual Retirement Accounts (IRAs).
 

• The Vantagepoint Funds
  
  The Vantagepoint Funds, which is sponsored by ICMA-RC, is an SEC-registerd "series" investment company (mutual fund) offering distinct portfolios. Each portfolio has a different investment objective and strategy. The funds of the VantageTrust each invest solely in the shares of a corresponding Vantagepoint Fund, with the exception of the stable value PLUS Fund.
   
• ICMA-RC Services, LLC
  
  ICMA-RC Services, LLC ("RC Services") is the broker-dealer through which Vantagepoint Securities are distributed. ICMA-RC Services is a member of the NASD and SIPC and is an affiliate of ICMA-RC.
   
• Vantagepoint Investment Advisers, LLC
  
  Vantagepoint Investment Advisers, LLC ("VIA") serves as an investment adviser to the Vantagepoint Funds. VIA is an affiliate of ICMA-RC.
   
• Vantagepoint Transfer Agents, LLC
  
  Vantagepoint Transfer Agents, LLC ("VTA") serves as transfer agent for the Vantagepoint Funds. VTA is an affiliate of ICMA-RC.

What services can I expect?

The ICMA Retirement Corporation is committed to offering the best retirement products and services available. Our programs are designed to specifically for the public employee. Some of the additional advantages are:

• Internet site at http://www.icmarc.org
• 24-hour access to account information via toll-free telephone and the Internet
• Ability to transfer assets and allocate future contributions over the phone and the Internet
• Competitive fees, no hidden fees. Free fund-to-fund transfers among investment options⁸
• Personalized service, including assistance in enrollment and retirement planning
• Quarterly combined account statements and performance summaries
• Quarterly newsletter
• Nationally recognized education materials including Charting Your Course, a comprehensive retirement planning tool

Get Started Today!

Inquire with payroll for details on how to sign up, or go to http://www.icmarc.org for more information.

Write or call:

ICMA Retirement Corporation
777 North Capitol Street, NE
Washington, DC 20002-4240
1-800-669-8216

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