The ORP provides many different benefit payment methods, allowing participants great flexibility in crafting their retirement benefits to meet their personal financial needs. While the plan includes a normal form of payment (annuity), participants may choose from the other payment methods available from their provider.
Additionally, participants may draw funds from the plan using different payment methods, and at different times.
The availability of such a wide choice of payment methods can create confusion when trying to choose the best method(s) for any individual participant. Your ORP provider is prepared to assist you with this decision.
The default benefit payment method for married participants is a Joint & Survivor Annuity with 50% payable to the Survivor. The “Survivor” is the participant’s spouse.
Spouses may waive their rights to the Joint & Survivor annuity, enabling use of other payment methods from the Plan for the participant. Spousal Waivers are included in the Provider’s distribution forms
Annuity income provides a stream of income (usually monthly) for the life of the plan participant. This feature, that one cannot exhaust their retirement income, is why the ORP includes annuities as the normal form of payment.
As participants add features to their annuities (e.g. provide for more than one person; provide a guarantee period; ensure all assets are distributed; etc.), the amount of monthly income generally decreases. This is because the insurance company must hold assets in reserve to ensure payment of the additional features, which are liabilities to be supported by your account.
Systematic Withdrawals, sometimes called automatic withdrawals, allow participants to specify a fixed amount of payment that their provider must distribute (usually monthly). Participants may change both the amount and frequency of the payments at any time.
These payments continue until the sooner of:
Survivor benefits payable under systematic withdrawals are typically the remaining account balance. Consequently, this approach is often used in conjunction with participants’ estate tax planning.
Married participants must solicit their spouse’s waiver of their rights to a Joint & Survivor Annuity for 50% when electing to use Systematic Withdrawals from the Plan.
Participants may draw all or part of their ORP account balances in a lump sum upon termination of employment.
Married participants must solicit their spouse’s waiver of their rights to a Joint & Survivor Annuity for 50% when electing a lump sum distribution from the Plan.
Fixed period payments, sometimes called installment annuities, are paid by insurance companies. The company agrees, by contract with the participant, to make certain payments to the participant for a fixed period of time. The fixed periods are usually from two to 30 years. However, the period cannot exceed the participant’s life expectancy.
The stability and predictability of fixed period payments make them applicable when participants require a specific income for a set period of time. Participants often use this payment method for a portion of their account balance, usually during periods of early retirement.
Survivor benefits under a fixed period arrangement can vary by provider. However, they are generally an actuarially-determined value (discounted) of the un-paid installments; not simply the remaining balance.
Married participants must solicit their spouse’s waiver of their rights to a Joint & Survivor Annuity for 50% when electing to use Fixed Period Payments from the Plan.
Participants may elect to draw only the investment income and/or interest from their accounts. The providers’ features for this payment method can vary widely, depending on the type of investment supporting the payments.
Interest only payments can suit many needs, and are often used in conjunction with estate tax planning efforts.
Survivor benefits under interest only arrangements can vary by provider. The death benefit is typically an actuarially-determined (discounted) value of the future payments, not simply the un-paid account balance.
Married participants must solicit their spouse’s waiver of their rights to a Joint & Survivor Annuity for 50% when electing to use Interest Only Payments from the Plan.
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