Other Payment Forms
ORP participants may draw benefits from the plan in a wide variety of methods. These include, but are not limited to:
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:
- the participant directs the Provider to stop or change the current payments; and
- the participant’s account balance is exhausted.
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.
Lump Sum or “Cash” Payments
Participants may draw all or part of their ORP account balances in a lump sum upon termination of employment.
Fixed Period Payments
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 thirty 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.
Interest Only Payments
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.