New Annuity and Installment Payment Options

New Annuity and Installment Payment Options under the 401(k) Plan

Those of you who are participating in the 401(k) Plan know that you may withdraw your funds for a limited number of reasons without penalty. The two most common examples of this are withdrawals when you reach Normal Retirement Age (59 1/2 or older as defined by our Plan) or become eligible for disability benefits. Up until now, the only way to withdraw your monies from the 401(k) Fund was by either taking a full withdrawal, which would close your account, or by making periodic partial withdrawal requests.

Now if you become eligible to withdraw funds as a result of reaching Normal Retirement Age, or becoming disabled, you may have two new options that will enable you to activate automatic periodic payments to you: arrange for Installment Payments, or purchase an Annuity from MassMutual. You could have always withdrawn your money and purchased an individual annuity from MassMutual, or another insurer, and can still do that. But individual annuities can be hard to understand and may require a significant "additional cost" (e.g. commissions) paid to the entity that sells you the annuity. You can avoid some of those problems by purchasing an immediate annuity from MassMutual.

Installment Options for all Participants and Beneficiaries
Effective immediately, you (your Beneficiary if you are no longer living) may elect the following installment options (scheduled payments for 401(k) normal/disability distributions):

Fixed Amount Installment - A Fixed Amount Installment is an amount fixed by you (or your Beneficiary) and payable every month, calendar quarter, semi-annually, or annually. A Fixed Amount Installment Option provides for payment in that fixed amount until the Account Balance is exhausted.
Fixed Period Installment - A Fixed Period Installment is an amount paid every month, calendar quarter, semi-annually, or annually, as elected by you (or your Beneficiary). The amount of each payment shall by the Account Balance divided by the number of remaining payments for the period elected and shall be paid until the Account Balance is exhausted.
Lifetime Installment - A Lifetime Installment is paid over the period estimated to be your (or your Beneficiary's) life expectancy, as determined by your (or your Beneficiary's) Single Life Expectancy factor under the IRS Table ("Life Expectancy"). Such payments will be paid every month, calendar quarter, semi-annually, or annually, as elected. The amount of each payment shall be recalculated each time by dividing your (or your Beneficiary's) Account Balance by your (or your Beneficiary's) Life Expectancy at the time of the payment and shall continue until the Account Balance is exhausted.

Installment options are a convenient way to establish periodic payments, but neither the amount or length of payments are guaranteed over the long run. When your money runs out, it runs out. In contrast, annuities can provide guaranteed income for a specified period for a price.

Annuity Option

An annuity offers a second option for those who wish to receive periodic payments. The advantage of an annuity is that the payments made under an annuity are guaranteed. When the annuity is purchased, you are assured a period certain for a specific amount (the guarantee period ranges from five years, to your life and that of your beneficiary, depending on the specific type of annuity you choose).

The biggest downside for purchasing an annuity under the 401(k) Plan (apart from having to pay a fee of $175 to MassMutual to purchase it) is that you no longer have control of the lump sum account balance that you used to purchase the annuity. That now belongs to the insurance company.

We want to be clear from the outset that an annuity through MassMutual is only one option. You should consider other annuity options and other approaches to handling your 401(k) contributions before you decide to purchase an annuity from MassMutual or any other insurer.

Annuity Options for Unmarried Participants, Beneficiaries and Married Participants with Spousal Consent

Single Life Annuity with a 5 Year Guarantee - You may elect a Single Life Annuity with a 5 Year Guarantee if you are not married, or if you are married and have your spouse's consent. The Single Life Annuity is the option that provide you with the highest monthly payments during your lifetime.

A Single Life Annuity with a 5 Year Guarantee means an annuity payable over your lifetime, but with a guarantee of a minimum of 60 monthly payments. If you die before receiving at least 60 payments, your Beneficiary will receive the remaining monthly payments until 60 have been made by the annuity. The Single Life Annuity with a 5 Year Guarantee benefit will be the amount of monthly benefits that can be purchased in that form from an insurance company (currently Mass Mutual) with your Account Balance at the time payment is due. You may also choose to elect to purchase an Annuity with only part of your Account Balance.

Joint and Survivor Annuity with Non-Spouse Beneficiary - If you are single (or you are married and your spouse consents), you may also choose a Joint and Survivor Annuity with a non-spouse beneficiary.

Annuity Options for All Participants

If you are married, the only annuity option available is what is known as a Joint and Survivor Annuity (an annuity that pays a monthly amount to you for your life, and then to your spouse for his or her lifetime upon your death, (if he or she survives you). You may elect a different annuity option (either the Single Life Annuity or a survivor annuity with a non-spouse beneficiary) only if your spouse consents in accordance with the Plan's rules. You may not revoke a Joint and Survivor election once payments have begun, nor will your benefits increase if you divorce or your spouse (or non-spouse beneficiary) dies.

50% Joint and Survivor Annuity - A 50% Joint and Survivor Annuity means a monthly annuity payment to you for your life, with a monthly payment of 50% of that amount to your spouse (or non-spouse beneficiary) upon your death if he or she survives you. The 50% Joint and Survivor Annuity benefit will be the amount of monthly benefits that can be purchased in that form from an insurance company (currently MassMutual) with your Account Balance at the time payment is due. You may also choose to elect to purchase an annuity with only part of your Account Balance.
75% Joint and Survivor Annuity - A 75% Joint and Survivor Annuity means a monthly annuity payment to you for your life, with a monthly payment of 75% of that amount to your spouse (or non-spouse beneficiary) upon your death if he or she survives you. The 75% Joint and Survivor Annuity benefit will be the amount of monthly benefits that can be purchased in that form from an insurance company (currently MassMutual) with your Account Balance at the time payment is due. You may also choose to elect to purchase an annuity with only part of your Account Balance.
100% Joint and Survivor Annuity - A 100% Joint and Survivor Annuity means a monthly annuity payment to you for life, with a monthly payment of 100% of that amount to your spouse (or non-spouse beneficiary) upon your death if he or she survives you. The 100% Joint and Survivor Annuity benefit will be the amount of monthly benefits that can be purchased in that form from an insurance company (currently MassMutual) with your Account Balance at the time payment is due. You may also choose to elect to purchase an annuity with only part of your Account Balance.

For additional information, please contact the Retirement Services Department within the Fund Office and a representative can assist you.