A Guide to the New KP Retirement Path Funds
KP Retirement Path Funds Are Coming Soon to Your Kaiser Permanente Retirement Savings Plans Table of contents 4 What’s Happening? 6 A New Way to Invest — KP Retirement Path Funds 12 How the Fund Change Affects You 14 Get the Most Out of Your Plan 16 Contacting Vanguard 17 Account Blackout Legal Notice
Check out the Financial Wellness Video Series To assist you with managing your financial wellness, Kaiser Permanente has developed a Financial Wellness Video Series. The series explores a wide range of financial issues and points you to the tools and resources that can help you plan ahead to meet your financial goals. Check out the videos at vanguard.com/kpvideoseries.
The path to financial wellness starts with understanding your current financial situation, assessing your future financial needs, and having a strategy to meet those needs. At Kaiser Permanente, we believe that financial wellness is an important part of your total health. To help you manage and improve your total health and well-being, we offer tools and programs that can support your goals now and in retirement. The Kaiser Permanente-sponsored retirement savings plans can play a key role in your pursuit of financial wellness. While these plans are already powerful savings tools, we are pleased to announce new investment options that can make them an even more effective tool for retirement savings. The new options, called the KP Retirement Path Funds, will be available in February 2014 and will replace the current Vanguard® LifeStrategy ® Funds. The KP Retirement Path Funds offer a professionally managed portfolio strategy, taking into account your expected retirement date. This brochure provides important information about how the new funds work, how your account may be affected, and the benefits of contributing to your savings plan.
Important Information About Transaction Restrictions for the Fund Transition All accounts will experience a short blackout on all transactions beginning January 30, 2014, and ending the week of February 2, 2014. This blackout period is designed to ensure a smooth and accurate transition. This restriction on account activity is needed to implement the transition to the KP Retirement Path Funds. See the notice on page 17 for details. If your funds are invested in a Vanguard LifeStrategy Fund and you want to move to a KP Retirement Path Fund, you do not need to take any action. Your account balance in any Vanguard LifeStrategy Fund will move automatically to a KP Retirement Path Fund, as described in this brochure, unless you move your balance to another fund in your plan’s lineup before the transition date. In addition, if you have elected to direct future contributions to a LifeStrategy Fund, that election will automatically switch to a KP Retirement Path Fund unless you change your election before the transition date. If your funds are not currently invested in a Vanguard LifeStrategy Fund but you would like to take advantage of the KP Retirement Path Funds, you can do so once the blackout period is complete. Simply contact Vanguard using the instructions on page 16 to move your existing balance and/or redirect your future contributions.
Turn the page to learn more
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What’s Happening? During the week of February 2, 2014, ten custom target date funds, called the KP Retirement Path Funds, will become part of your retirement savings plan investment lineup. The KP Retirement Path Funds will replace the four Vanguard LifeStrategy Funds, which will be removed from the investment lineup on January 31, 2014. All other plan features, including your other investment options, Vanguard Brokerage Option, and advice services will remain the same. The KP Retirement Path Funds are specifically designed to establish and maintain a mix of investments that gradually changes as you approach your projected retirement date. This way you will sustain a mix of investments that changes automatically throughout your career at Kaiser Permanente. The funds are professionally managed and invested assuming you will retire at age 65, but you are always free to direct your account to any of the other investment options in the plan. Learn more about how the KP Retirement Path Funds work on page 7. Please note: See page 12 for more information on the transition process. For more information on the retirement savings plans through Vanguard, log on to your account at vanguard.com/ retirementplans.
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Why Are We Introducing Custom Target Date Funds? The KP Retirement Path Funds are custom funds. This means the funds are designed to suit the needs and demographics of the Kaiser Permanente workforce. We chose to use custom target date funds instead of “off-the-shelf” target date funds (such as those offered by other investment management companies), in order to offer unique features, such as: • Access to carefully selected investment managers not generally available to individual
investors, each of whom specializes in a different asset class. These funds offer the simplicity of a complete portfolio in a single fund and have competitive fees compared to similar funds generally available in the market. • A customized approach to determine each fund's asset allocation strategy and how that
allocation changes as the target date nears. The specific approach for each fund takes into consideration the investment needs of Kaiser Permanente's overall workforce and other Kaiser Permanente retirement income programs. We believe the KP Retirement Path Funds enhance the investment options available to you as a participant in Kaiser Permanente-sponsored retirement savings plans.
Funds Geared Toward Your Retirement Today, retirement can last more than 30 years. Your savings in the Kaiser Permanentesponsored retirement savings plans can be an important source of retirement income. KP Retirement Path Funds can help with one of your most important responsibilities as an investor — your investment strategy, including how your money is allocated among different types of investments. The new target date funds are designed so that the investment mix gradually and automatically changes from more aggressive investments to more conservative investments as you get closer to retirement.
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A New Way to Invest – KP Retirement Path Funds Each KP Retirement Path Fund has an associated target retirement year. The year in each fund’s name refers to the approximate year a participant plans to retire (assuming a retirement age of 65). As the target date approaches, the fund’s investment mix automatically adjusts. KP Retirement Path Funds may appeal to you if you want your asset allocation managed for you, rather than having to choose among other available funds and actively rebalance your investments over time. In this way, KP Retirement Path Funds offer an “all-in-one” investment strategy for retirement. Remember, however, that you always have the option to direct your investments as you choose.
QUICK FACTS ABOUT KP RETIREMENT PATH FUNDS • The target date in each fund name corresponds with the approximate year an investor
plans to retire (assuming a retirement age of 65) • Each fund invests in a diversified mix of asset classes and is designed to be a complete
portfolio in one fund • The asset allocation for each fund will automatically adjust from a more aggressive
investment mix to a more conservative investment mix as the target date approaches
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How the Funds Work Each KP Retirement Path Fund holds a broadly diversified mix of assets, including stocks (equities), bonds (fixed income investments), and “real” assets (such as commodities, inflation-protected bonds, infrastructure, and real estate). The mix of assets in each fund changes automatically in a gradual process, from more aggressive investments to more conservative investments. For example: • The fund with the most distant target retirement date will hold the highest percentage of stocks
and other “return-seeking” investments. • Funds with a closer target retirement date, however, will hold a lower percentage of aggressive
investments and a higher percentage of more conservative investments, including bonds. To reduce risk as a fund’s target retirement date approaches, the fund’s advisor gradually decreases the fund’s stock holdings and increases its bond holdings because bonds typically have a lower risk of loss (though they also tend to have lower potential gains). If you plan to retire significantly earlier or later than age 65, you may select a fund with an investment strategy more suited to your needs. See page 10 to learn more about choosing a fund.
A Note About Active Fund Management The KP Retirement Path Funds utilize some underlying funds that are actively managed. This means that, over time, the managers have a fundamental goal to outperform the general market. Target date funds that only use underlying funds that are actively managed are typically more expensive than those that use index funds, because of expenses for specialized market research and active investment management professionals. While the KP Retirement Path Funds have competitive expense levels, the funds may have fees that are higher than some other investment options in your Kaiser Permanente-sponsored retirement savings plans.
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The Glidepath — Asset Allocation Over Time Your KP Retirement Path Fund helps you maintain a sensible investment strategy all the way through retirement by changing its asset allocation over time. The way that the fund changes its asset allocation is known as the “glidepath.” In short, the glidepath is the specific way the fund will shift its asset allocation over time. On the glidepath below, the years on the horizontal axis represent the list of available target retirement dates. The asset allocation for the particular target date is reflected on the vertical axis according to the color-coded asset classes.
Assumed age of investor 20
25
30
35
40
45
50
55
60
65
100%
Percent of portfolio
80%
60%
FPO
40%
20%
ca tio n
15
al
lo
20
20 20
25 20
30 20
35 20
40 20
45 20
50 20
55 20
20
60
0%
Equity
Real Assets
En
Fixed Income
Large-Cap Equity
Real Assets
Fixed Income
Small-Cap Equity
Inflation Protection
Short-Term Fixed Income
International Equity
8
d
Years to retirement
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Your KP Retirement Path Funds at a Glance The chart below provides the target investment mixes and expense ratios of the KP Retirement Path Funds. An expense ratio represents the cost of running the fund, expressed as a percentage of the fund’s assets as of the most recent fiscal year. Fund Name
KP Retirement Path 2015 Fund
KP Retirement Path 2020 Fund
KP Retirement Path 2025 Fund
KP Retirement Path 2030 Fund
KP Retirement Path 2035 Fund
KP Retirement Path 2040 Fund
KP Retirement Path 2045 Fund3
KP Retirement Path 2050 Fund3
KP Retirement Path 2055 Fund3
KP Retirement Path 2060 Fund3
Initial Investment Mix1
GROSS Expense Ratio2
0.38%
29.8% stocks 48.2% bonds 22% real assets
0.42%
41.9% stocks 39.5% bonds 18.6% real assets
0.46%
56.2% stocks 29.2% bonds 14.6% real assets
0.50%
69.5% stocks 19.9% bonds 10.6% real assets
0.53%
78.4% stocks 14.3% bonds 7.3% real assets
0.54%
84.4% stocks 10% bonds 5.6% real assets
0.54%
87% stocks 8% bonds 5% real assets
0.54%
87% stocks 8% bonds 5% real assets
0.54%
87% stocks 8% bonds 5% real assets
0.58%4
87% stocks 8% bonds 5% real assets
1. A llocation targets for each fund, as of January 1, 2014, which will shift quarterly from stocks to bonds and real assets over time as the target date approaches. 2. T his figure is an average weighted expense ratio, based on expenses incurred by the funds that make up each KP Retirement Path Fund. Because KP Retirement Path Funds are being newly established, the expense ratio is the projected cost of running the fund. Source: Callan. 3. The target allocations of the KP Retirement Path 2045 Fund through the KP Retirement Path 2060 Fund are currently identical; however, over time, each fund will gradually shift to a more conservative allocation depending on its target date. 4. The expense ratio of KP Retirement Path 2060 Fund includes a 0.04% rebate, so the net expense ratio of the fund is 0.54%.
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Choosing a KP Retirement Path Fund When deciding which KP Retirement Path Fund is right for you, consider choosing the fund with the target date closest to the year in which you will reach age 65. If you have already reached age 65, consider choosing the KP Retirement Path 2015 Fund. While this is a good starting point, once you review the investment strategy of all the funds and all the glidepaths, you may decide to select a different target date fund or other investments more suited to your needs. Because your situation could change over time, it is a good idea to periodically review the asset mix of your selected KP Retirement Path Fund to make sure it matches your goals and risk tolerance. You may change funds at any time.
For More on the New Funds For more details about the KP Retirement Path Funds, you may access the fund fact sheets and prospectuses online by: 1. Logging on to your account at vanguard.com/retirementplans. 2. Clicking the Plan Summary tab. (If you have multiple accounts at Vanguard, you may need to select Employer plans first.) 3. Clicking Plan Communications from the dropdown menu under the Plan Summary tab. Your Current LifeStrategy Fund Investments If you currently invest in a Vanguard LifeStrategy Fund, your account balance in that fund, and any election to direct future contributions to that fund, will automatically transfer to the applicable KP Retirement Path Fund as of January 31, 2014. Your money will transfer to the fund with the target date closest to the year in which you will reach age 65. If you are already age 65 or older, your money will automatically transfer to the KP Retirement Path 2015 Fund. See page 12 for details on how the fund change affects you.
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A Note About Risk All investing is subject to risk, including the possible loss of the money you invest. A KP Retirement Path Fund is subject to the risks of its underlying funds, and its returns are not guaranteed at any time, including on or after its target date. There can be no assurance that the funds will achieve their stated objectives. An investor may experience losses, at any time, including near, at, or after a fund's target retirement year. In addition, there is no guarantee that an investor's investment in the fund will provide any income at or through the years following the fund's target retirement year in amounts adequate to meet the investor's goals or retirement needs. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest. Non-investment grade bonds involve greater risks of default and are more volatile than investment-grade securities, due to the speculative nature of the investment. Mortgage-backed securities are subject to pre-payment and extension risk and therefore react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly and significantly reduce the value of mortgage-backed securities. KP Retirement Path Funds may invest in derivatives. Derivatives are subject to a number of risks, such as liquidity risk, interest rate risk, market risk, credit risk, and management risk. A fund investing in a derivative instrument could lose more than the principal amount invested. The managers of the underlying funds in the KP Retirement Path Funds may also utilize leveraging which may accelerate the velocity of potential losses. Stock funds are subject to increased market risk, which is the possibility that your portfolio will experience significant downturns in a short period. Prices of small-cap stocks often fluctuate more than those of large-company stocks. Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility. Diversification does not ensure a profit or protect against a loss.
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How the Fund Change Affects You On January 31, 2014, the four Vanguard LifeStrategy Funds in your plan will transition to the KP Retirement Path Funds. This transition will occur automatically — no action is required on your part. If you have an account balance in a LifeStrategy Fund, it will move to the KP Retirement Path Fund with the target year closest to the year in which you will reach age 65. For example, if you were born in 1968, and will turn 65 in 2033, your current balance in, and future contributions to, the LifeStrategy Funds will move to the KP Retirement Path 2035 Fund. If you are already age 65 or older, your account balance and any future contributions will move to the KP Retirement Path 2015 Fund.
Where Your Money Will Move Here's how your money will move, unless you actively elect another investment option. Your Money Will Move From Here . . .
To Here . . .
Vanguard LifeStrategy Growth Fund
The KP Retirement Path Fund with the target year closest to the year in which you will reach age 65.
Vanguard LifeStrategy Moderate Growth Fund Vanguard LifeStrategy Conservative Growth Fund
Please note: If you are age 65 or older, your account balance and any future contributions will move to the KP Retirement Path 2015 Fund.
Vanguard LifeStrategy Income Fund
If you prefer to invest in funds other than the KP Retirement Path Funds and wish to make an investment change prior to the transition, you must contact Vanguard before 1 p.m., Pacific time (4 p.m., Eastern time), on January 30, 2014.
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Temporary Plan Blackout: Restrictions on Activity (January 30 Through the Week of February 2, 2014) To ensure a smooth and accurate transition, transactions in all Kaiser Permanente retirement savings plan accounts at Vanguard will need to be temporarily restricted. We refer to this as the blackout period. During this period, you will not be able to: • Enroll in the plan • Move money between funds • Change which funds you invest your money in • Change how much of each paycheck you contribute • Change the address on your account • Request a loan • Make unscheduled loan payments • Request withdrawals or distributions
After these restrictions are lifted, you can engage in any of the transaction listed above by contacting Vanguard. See below for key dates related to the blackout period.
Key Transition Dates Please review the chart below for a summary of the key transition dates. Thursday, January 30, 2014, at 1 p.m., Pacific time (4 p.m., Eastern time)
Transition and blackout period start. Certain transactions will be restricted (see list above). You will receive a reminder before the restrictions begin.
Friday, January 31, 2014
Transfer period. Any money you have invested in a Vanguard LifeStrategy Fund will be transferred to the KP Retirement Path Fund with the target year closest to the year in which you will reach age 65. If you are age 65 or older, your money will move to the KP Retirement Path 2015 Fund.
Week of February 2, 2014
Transition and blackout period end. All transactions are available through Vanguard.
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Get the Most Out of Your Plan Your Kaiser Permanente retirement savings plan can be a valuable way to save for your future. If you aren’t currently contributing, there’s no better time to start than now. Save More — Automatically One of the best ways to increase your savings rate is to do so in small steps when you can. Your plan offers an automatic annual increase feature that can help put you on the right track. All you need to do is decide how much more of your pre-tax compensation you want to save each year — from 1 to 10 percentage points — and the month you’d like your savings plan contribution increase to take effect. Then, automatic increases will continue annually until you change or stop them, or until your contributions reach the plan’s limit of 75 percent of your eligible compensation or the Internal Revenue Service (IRS) limit, whichever comes first. You may change or stop your automatic contribution rate increases at any time by contacting Vanguard.
Did you know? As a general rule, you may need about 75 percent to 85 percent of your current income on an annual basis for a more comfortable retirement. To achieve this, consider saving 10 to 12 percent (or more) of your income each year in a voluntary retirement savings plan, such as contributions to your Kaiser Permanente-sponsored savings plan if available. Your savings plan account is in addition to any pension benefit you may accrue at Kaiser Permanente.
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Increase Your Contribution Rate To increase your contribution rate or sign up for automatic increases: 1. Log on to your account at vanguard.com/retirementplans. 2. Select Manage my money. 3. Select Change my paycheck deduction. Please note: If you have multiple accounts at Vanguard, you may have to select Employer plans before you click Manage my money.
My MoneyWhys® Education and News Center This online experience offers customizable online education and news with a variety of tools and articles. To get the full benefit of the My MoneyWhys education and news center, including saving your favorite articles, obtaining recommendations, and sharing content with friends, log on to your Vanguard account today at vanguard.com/retirementplans.
Guidance and Advice Services The KP Retirement Path Funds are one way to help you invest for retirement. Your Kaiser Permanente retirement savings plan, administered by Vanguard, also offers an array of advice and education tools that can help you manage your savings and build toward a more comfortable retirement. Whether you just need a few pointers or would like someone to handle your investments, you can find a product or service that's right for you. To learn more: 1. Log to your account at vanguard.com/retirementplans. 2. Select Review my performance. (If you have multiple accounts at Vanguard, you may need to select Employer plans first.) 3. Select Get help planning for retirement.
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Contacting Vanguard If you have any questions about the new KP Retirement Path Funds or would like to access your account, you can contact Vanguard in the following ways: • Online. Log on to your account at vanguard.com/retirementplans anytime.
Not yet registered for immediate, secure online account access? You will need your plan number, which you can find on My HR or on your quarterly plan statement. • By phone. Call Vanguard’s 24-hour interactive VOICE® Network at 1-800-523-1188. You will need
a personal identification number (PIN) to use VOICE. To create a PIN, follow the prompts. • Personal assistance. Vanguard Participant Services associates are available at 1-800-523-1188
Monday through Friday from 5:30 a.m. to 6 p.m., Pacific time (8:30 a.m. to 9 p.m., Eastern time).
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Legal Notice Concerning the Blackout in Your Kaiser Permanente Retirement Savings Plan As described in this brochure, the transition to KP Retirement Path Funds will begin at 1 p.m., Pacific time (4 p.m., Eastern time), on January 30, 2014. To ensure an orderly and accurate transition, activity in your Kaiser Permanente retirement savings plan account will need to be temporarily restricted at this time. During this time, you will not be able to: • Enroll in the plan • Move money between funds • Change which funds you invest your money in • Change how much of each paycheck you contribute • Change the address on your account • Request a loan • Make unscheduled loan payments • Request withdrawals or distributions
During this blackout period, you can continue to trade securities within your Vanguard Brokerage Option (VBO®) if you maintain one. However, you will not be able to move money into or out of your VBO account until this period is over. You will also be able to make changes to your beneficiary information during this period. The blackout is expected to end during the week of February 2, 2014. After the blackout ends, you can transfer money between funds at any time by contacting Vanguard at 1-800-523-1188 or by logging on to your account at vanguard.com/retirementplans. You may also contact Vanguard if you have any questions concerning this notice or to determine whether the blackout period has ended.
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Legal Notice Concerning the Blackout in Your Kaiser Permanente Retirement Savings Plan (cont'd) Review Your Investments Because account activity will be on hold during the transition, it is important that you review your current investments in light of the restrictions during the blackout period. For your long-term retirement needs, you should carefully consider the importance of a balanced and diversified investment portfolio, taking into account all your assets, income, and investments.
How Your Account Will Move If you have balances in and contributions directed to any of the four Vanguard LifeStrategy Funds, they will move to the KP Retirement Path Fund with the target year closest to the year in which you will reach age 65. If you are already age 65 or older, your money will move to the KP Retirement Path 2015 Fund. After the blackout period ends, you will be able to make an investment change to a different KP Retirement Path Fund, or to other investments. If you do not have any balances in Vanguard LifeStrategy Funds, you will be able to make an investment change to include a KP Retirement Path Fund in your account after the blackout period ends.
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For more information about any fund, including investment objectives, risks, charges, and expenses, call Vanguard at 1-800-523-1188 to obtain a prospectus. The prospectus contains this and other important information about the fund. Read and consider the prospectus information carefully before you invest. You can also download Vanguard fund prospectuses at vanguard.com. Vanguard, VBO, MoneyWhys, LifeStrategy, and VOICE are trademarks of The Vanguard Group, Inc. Data provided by Callan Associates is based on the information available at the time of publication, in an effort to provide accurate and timely information about the funds. However, the information is not warranted to be accurate or timely. Neither Callan nor its content providers are responsible for any damages arising from any use of this information. Vanguard Marketing Corporation is the distributor of the Vanguard Funds and is not affiliated with Kaiser Permanente or SEI Investments Distribution Co. The KP Retirement Path Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Callan Associates or Vanguard.
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