Optional Retirement Program
This program is sponsored by the University of North Carolina system. The Board of Governors of The University of North Carolina is responsible for the administration of the ORP and designates the vendors authorized to offer investment products.
The University of North Carolina Optional Retirement Program (ORP) is an option or alternative to the North Carolina Teachers' and State Employees' Retirement System (TSERS) for certain employees. Under the ORP, you control your investments choices, distribution methods and retirement goals, whereas the State controls the investments under TSERS.
The ORP is a defined contribution plan. The University has authorized four vendors to offer investment products under the ORP. These are Fidelity Investments, Lincoln Financial Group, TIAA-CREF and VALIC. For more information about the authorized companies or their products, including investment options, services and fees, you should contact a company representative.
You are eligible to join the ORP if you are permanent full-time employee working 30 or more hours per week for nine or more months per year on a recurring basis as a:
Faculty member with the rank of Instructor or above. Your faculty appointment may be a 9- or 12-month appointment, and need not be your primary appointment.
EPA Non Faculty employees (SAAO, Instructional and Research)
Contribution Amounts & Participation
You are required to contribute 6 percent of your salary on a pre-tax basis (before State and Federal taxes). The plan is also funded by University contributions of 6.84 percent of your salary. You must complete a Retirement Election Form (ORP-1 form) and vendor enrollment form to complete your enrollment in the ORP. You have 60 days from your date of employment to complete and return your forms to Benefits Services. If you do not complete the necessary forms to enroll, you will automatically be enrolled in the Teachers' and State Employees' Retirement System. Enrollment in TSERS will be irrevocable.
Vesting
You are immediately 100 percent vested in the value of your employee contributions. The value of your employer contributions is 100 percent vested after five years of participation in the ORP. If you terminate employment with less than five years of ORP participation, you will become 100% vested in the ORP employer contribution provided you meet all of the following requirements:
your new employer is a higher education institution that sponsors a substantially similar or "like" retirement plan,
the successor plan offers a "like retirement plan" that is underwritten by one of the four carriers currently underwriting the ORP benefit, and
you begin participation in that successor plan as your "core retirement plan" within 12 months following your termination of eligible service in the plan (usually your termination of employment) with The University of North Carolina.
Retirement Benefits & Distribution Options
Under the ORP, the amount of your monthly benefit is based on the total accumulation in your account(s) including any credited interest or dividends, your age, the age of your annuity partner, if applicable, and the income option selected. There are no age or service requirements to meet in order for a vested participant to begin receiving a benefit.
Each ORP carrier makes available optional forms of payments and a variety of retirement payment options designed to allow you to tailor-make your retirement payments to meet your financial needs. These may be fixed annuity payments or payments on a variable basis, or a combination thereof. You may also elect to receive a lump sum distribution, as permitted by the ORP carrier(s). However, to be eligible to continue your State Health Plan coverage in retirement, you must begin to receive an ORP benefit on a monthly basis at retirement and this payment must be distributed directly from your ORP account. If you withdraw, transfer or rollover your entire ORP account, you will forfeit your right to the State’s retiree group health plan coverage.
Retiree Health Insurance
When you retire and begin receiving monthly benefits from the ORP, you may also be eligible to enroll in the State Health Plan with the cost determined by when your employment started with the State:
If you were first hired prior to October 1, 2006, and retire with five or more years ORP participation, the State will pay either all or most of the cost if you select one of the Preferred Provider Organization (PPO) plans, depending on the plan chosen.
If you were first hired on or after October 1, 2006, in order to receive individual coverage at no cost, you must retire with 20 or more years of retirement service credit; if you have 10 but less than 20 years of retirement service credit, you will have to pay 50 percent of the cost for your coverage, and with five but less than 10 years, you will have to pay the full cost for your coverage. In all cases, the full cost of dependent coverage, if elected, must be paid by you.
If you withdraw, transfer or rollover your entire ORP account, you will forfeit your right to the State’s retiree group health plan coverage.
Income Taxes
Federal Tax
When you begin receiving an ORP retirement benefit, any pre-tax contributions made by you and the University, as well as any investment earnings on these contributions, are taxed as ordinary income. If any of your contributions were made on an after-tax basis, the portion of the retirement benefit attributable to these after-tax contributions will not be taxed. (Note: ORP employee contributions made prior to July 1, 1982, were made on an after-tax basis.)
State Tax
The amount of retirement annuity income subject to State income tax is the same amount on which federal income tax must be paid, less an exclusion as large, in some cases, as $4,000. If the taxable portion of your annual retirement annuity income is $4,000 or less, you will not owe any State income tax on your retirement benefits.
[Exception: If you were enrolled in the ORP on or before August 12, 1989, your ORP retirement benefits, no matter what amount, are exempt from State income tax.]
