A Benefit Payment Option
How Periodic Payments Work
The Periodic Payment option is one of the many available benefit payment options under the State of Alaska Deferred Compensation Plan. With Periodic Payments, you are able to enjoy benefit payments that are withdrawn directly from your account balance. You elect the amount and frequency of your payments. Your remaining account balance will continue to earn gains or losses associated with the funds your account is invested in.
Unlike life annuity options, Periodic Payment options provide NO guarantee of lifetime income. The benefit payments will continue only until assets are depleted. You should carefully review all your payout options before making a selection.
You may choose from the following Periodic Payment options. Please consider your long-term financial needs and review the options carefully. You can make changes to the Periodic Payment at any time. You can also elect to Direct Transfer the account balance to an IRA or other qualified plan.
- Payments for a specified period (Period Certain)
- This option allows you to choose the period over which you will receive payments. For example, if you wish to receive monthly payments for 10 years (120 months), the initial payout will be equal to 1/120th of the account balance. The second payment will be 1/119th of your account balance, the third, 1/118th, and so on. If you die before the end of the benefit period, your beneficiary receives the remaining account balance.
- Payments of a specified amount (Amount Certain)
- You will be paid the amount you choose on a monthly, quarterly, semi-annual or annual basis until the account balance is depleted. The final payment may be different than previous payments. If you die before your entire account balance is distributed, your beneficiary will receive the remaining account balance.
- Minimum distribution requirements
- If beginning distributions upon reaching age 70-½, you may request minimum distributions as specified under IRC Sections 401(a)(9) and 457(d). Under this option, your minimum distribution amount will be recalculated annually and your payments will be adjusted accordingly to meet the minimum distribution requirements established by the IRS.
- If upon reaching age 70-½ you are receiving periodic payments that do not meet Internal Revenue Code minimum distribution requirements, you will be required to increase payment amounts to satisfy these requirements.
For Periodic Payments, please contact:
- Empower Retirement Services
- PO Box 173764
- Denver, CO 80217-3764
- Phone: (800) 232-0859
- Fax: (866) 745-5766
Questions and Answers
- What is the minimum amount I must withdraw?
- The minimum payment to you must be an amount which meets the distribution requirements of the Internal Revenue Code, but can never be less than $50. Payments will be made at the necessary frequency to ensure the $50 minimum payment is met.
- What is the frequency of payments?
- All payments are available on a monthly, quarterly, semi-annual or annual basis, so long as the $50 minimum is met.
- How will payments be made?
- When a payment is due, the appropriate number of units will be redeemed to equal the payment amount. Because the unit values will vary from payment date to payment date, the number of units redeemed will vary accordingly.
- In what order are investment options liquidated?
- Your investment options automatically will be liquidated on a pro rata basis. However, you may elect specific funds for payments to be drawn from as long as there are sufficient monies available.
- Who controls the assets during the payout phase?
- You maintain control of investments of the account balance during Periodic Payment payouts.
- Are there additional expenses associated with Periodic Payments?
- There are no additional expenses, but all plan expenses continue to apply (recordkeeping, investment management, etc.).
- May I change the benefit payment level?
- Yes. You may change your payment structure at any time. You must always meet any minimum distribution requirements that apply by law.
- Can Periodic Payments be stopped and the balance moved to an IRA or other qualified plan?
- Yes. You can decide to do a partial or complete transfer, or rollover, to an IRA or other qualified plan. However, once there, all the tax penalty rules that did not apply to a regular payment from a 457 plan (i.e., the 10% early distribution penalty for payments before 59-½) now apply to payments made from the other plan.
- What are some of the advantages and disadvantages of Periodic Payments?
- You can transfer among all investment options available under the plan during the payout phase.
- Payments before 59-½ are not subject to an additional 10% early distribution penalty.
- You have maximum flexibility in the payment method. You can change the payment method at any time.
- You can later decide to direct transfer or rollover your account to an IRA or other qualified plan.
- You can outlive assets (unlike life annuity options).
- Your payments may fluctuate.
- What is the death benefit?
- The death benefit is the remaining account balance. No more payments will be made and there will be no death benefit when the account balance is zero.