Union of Poles in America

PAY-OUT

When the Member wishes his or her pay-out to start, he or she generally provides the UPA Home Office with six months' notice. (If there is no "build-up" period, UPA can begin the pay-out period on the first of the month following the month that the one-time payment was made.)

The pay-out can begin whenever the Member wants. There may, however, be tax penalties if the Member makes a partial withdrawal or starts the pay-out period before he or she is age 59-1/2.

Because the account builds up with all taxes deferred until pay-out, there are tax penalties for early withdrawal. Early withdrawal is, however, possible and may be advantageous even after paying the penalty. It all depends on the situation of the Member.

The pay-out may begin with retirement, if the Member wants to, but there is nothing wrong with having it start earlier or later. There is a box on the Application that requests the Member to state when the annuity is to begin the pay-out phase, but the age can always change. When the annuity begins after the Member retires and collects Social Security, the annuity payments can be viewed as a supplement to other income to offset inflation. A Member may find it advisable to wait well into his retirement years before beginning the pay-out period.

Once the pay-out begins, however, it cannot stop. Once the form of pay-out has been chosen, it cannot be changed.

But as we said before, the ANN-2001 is nothing if not flexible. In Exhibit II, you can see the variety of forms of annuity pay-out.

The first is "Life-time, No Refund." This form pays the annuity for the duration of the Member's life. If the Member dies in a year, he or she will have received 12 payments. If he or she lives thirty years, he or she will get 360 payments. This is a "no frills" form, usually good for widows or widowers who want the highest monthly payments for their money. After the annuity holder passes on, there will be no more payments to anyone!

The other three are "Years Certain and Life." These forms of payments have some guarantee attached to them. If a Member dies in a year, his or her beneficiary will continue to receive payment for the duration of the "years certain" period. If the Member chose 10 Years Certain and Life, then he or she and his or her beneficiary will get at least 120 payments. The longer the number of Years Certain, the lower the monthly benefit. That is because the Member is in effect paying for the guarantee that the payments will continue for that many years. If the Member lives longer than the Years Certain period, he will still receive monthly payments until he dies.

UPA also offers Joint and Survivor optional form. In this case, the Member and his or her spouse will continue to receive benefits as long as either or both of them are alive. The options here include an optional reduction in the payment level to recognize that couples need more income when two are alive than when one is. A Joint and 50% Survivor benefit reduces the monthly payment to 50% of what it was once one of the two people die. A Joint and 100% Survivor benefit does not reduce the benefit at all when one dies. But in the second case, the monthly benefit is less than in the first case. The reason is the cost of guarantee. As with Year Certain and Life, the monthly payments from the Joint and Survivor options are less than those from the Lifetime, No Refund option.

The fourth option is full or partial lump sum. The option makes sense if the Member has suddenly turned ill during the build-up phase, and needs cash immediately, no matter what the tax consequences. We repeat that once regular payments start, the Member cannot stop them.

As the Member receives payments, UPA will withhold income tax, if required, on the earnings portion of each payment as specified by law at the time of pay-out. At the end of the year, UPA will give Members receiving monthly payments a form telling them how much income tax had been withheld on their behalf.

At the time the pay-out begins, the annuitant will fill out a form specifying whether UPA should withhold any of the payment for income tax purposes. The annuitant also has the option of not withholding anything, but he or she will be responsible for paying Federal and State income tax each year.