You must draw a monthly income from your ORP account ("Retiree Income") in order to satisfy the Group Insurance Commission’s requirements to be a “Retiree”. Your ORP Provider will deduct the monthly premiums for your Retiree Insurance from your Retiree Income.
Income Payment Method: The Retiree Income that you draw must be a stream of monthly distributions payable over your life expectancy. The underlying investments supporting this stream may be either fixed or variable. You may structure the income using one of these two payment methods:
- Monthly annuity income; the annuity may be either a single life or joint annuity; fixed or variable;
- A stream of substantially equal monthly “Systematic” or “Automatic” withdrawals which is based on your life expectancy.
NOTE: Participants who use Systematic Withdrawals and subsequently reduce their assets in the plan to a point where their account cannot support a Retiree Income for the participant's life expectancy will no longer be considered to maintain a viable Retiree Income and will lose their eligibility for Retiree Benefits from the Group Insurance Commission.
Systematic Withdrawals: The Plan Administrator will determine if a participant’s monthly Systematic Withdrawals are structured for their life expectancy. This will be done by comparing the participant’s current account balance, for funds available to be distributed by Systematic Withdrawal, to the sum required to fund an annuity that generates an equal amount of monthly income, at the participant’s current age.
For married participants, the annuity used for comparison purposes will be a Fixed, Joint Annuity with 50% Benefit to the Survivor, with neither guarantee periods nor cost of living adjustments. The Plan Administrator will assume that both annuitants’ dates of birth are the same as the participant’s.
For single participants, the annuity used for comparison purposes will be a Fixed, Single Life Annuity with neither guarantee periods nor cost of living adjustments, at the participant’s current age.
Systematic Withdrawal Audit: The Plan Administrator will monitor the status of participants whose Retiree Incomes are paid by Systematic Withdrawal. Any Retiree whose account balance can no longer support the current (gross) monthly Retiree Income for the participant's life expectancy should change their payment method to an annuity. See the NOTE above concerning the loss of eligibility for Retiree Insurance benefits.
Single Provider: Your Retiree Income must be paid from a single ORP Provider, on the first day of each month. The Plan Administrator may require you to consolidate your ORP assets with a single Provider in order to generate an adequate income from one source.
Adequacy of Your Income: Your Retiree Income must be sufficient to pay the cost of your Retiree Insurance benefits. The Plan Administrator will determine the adequacy of your income based on these factors:
- Your gross monthly Retiree Income under the ORP; and
- Your total monthly Retiree Insurance premiums.
An “adequate Retiree Income” is one where total monthly Retiree Insurance premiums do not exceed 70% of gross monthly Retiree Income from the plan.
If your income is not adequate to cover the cost of your Retiree Insurance, the Plan Administrator may require you to increase the amount of Retiree Income (Systematic Withdrawals) you are drawing in order to be “adequate” to pay your premiums.
If you do not have sufficient additional assets in the plan with which to increase your Systematic Withdrawals or if you are drawing your income as an annuity, in order to maintain the adequacy of your Retiree Income, insurance premiums will not be deducted from your monthly Retiree Income and the GIC will send a bill to your home each month for the total cost of your benefits. You will be responsible for paying this bill on a timely basis, directly to the GIC.
Survivor benefits must also be adequate to pay the monthly Retiree Insurance premiums. If your survivor’s benefits are not adequate, then premiums will be billed directly to them by the Group Insurance Commission.
Income Start Date: You must begin receiving your Retiree Income within sixty (60) days of the later of:
- Your termination of employment with the Commonwealth, and
- Your notice to the Group Insurance Commission of your intent to purchase Retiree Benefits (submission of GIC Form-1).
Deduction of your monthly insurance premiums typically begins with the second month of your Retiree Income.
Provider Authorizations: While you are deemed to have authorized your ORP Provider to deduct Retiree Insurance premiums from your income, each Provider may require you to complete a written authorization to deduct your premiums that is unique to that company. You should submit your signed “Provider Authorization” to the Plan Administrator along with the completed application for your Retiree Income. The Administrator will forward both forms to your Provider once your benefit eligibility has been confirmed.