With a defined contribution plan like the ORP, the value of your benefit is not based on a predetermined formula. Rather, contributions are made by you and the University, resulting in a dollar accumulation that is used to provide a monthly income during retirement. The amount of your retirement income is primarily a function of the value of the account balances that you have accumulated throughout your years of employment. This, of course, is determined by the amount of contributions to your plan accounts and the performance of the investment funds you select.
Selecting an ORP Vendor
Under the ORP, you have a number of choices to make regarding your retirement fund. First, you must choose from the four vendors:
Click the vendor name in the chart above to connect to their website to find fund performance, expense and other information. You can also contact the local representatives to set up an appointment.
Items to consider in selecting a vendor(s) are;
- Financial strength and stability of the ORP carrier
- Contract fees, charges, and operating expenses
- Explanations of annuity options
- Interest rate history, policies, and guarantees
- Descriptions and performance history of investment accounts, and
- Special features and services offered by the carrier
Allocating Contributions
When you enroll in the ORP, you may elect to allocate both your contributions and the University's contributions to any one of the carriers or you may direct your contributions to one carrier and the University contributions to another. These allocations may be changed during any future month for which your payroll office can accommodate the change. You must also decide what portion of your contributions and the University's will go into a fixed account and/or what portion will go into an investment account. You may change your allocation for future premiums at any time by contacting your ORP carrier.
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.
Death Benefits
In the event of your death, your total account value from both employee and employer contributions is 100 percent vested and availableto your designated beneficiary. You designate your beneficiary when you complete your ORP enrollment application.
Retirement Benefits
Under the ORP, the amount of the benefit is based on the total accumulation in the 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 program 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 continue your State Health Plan coverage in retirement, you must begin to receive an ORP benefit on a monthly basis at retirement.
Retiree Health Insurance
When you retire and begin receiving monthly benefits from the ORP, you may also 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.
As a retiree, when you or covered dependents become eligible for Medicare, both Parts A (Hospital) and B (Medical) must be elected in order to maintain the same level of coverage provided before retirement.
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.]
