Generally speaking, all the various types of defined contribution plans discussed in Section II typically have the same form of payment options. Employees may be given more than one choice of payment option at retirement, which may include:
The lump sum payment option is typically the most popular payment option with defined contribution plans. With a lump sum distribution, all the benefits that the employee is entitled to are paid out to the employee within the same year. This payment option includes the ability to roll over the account balance to another employer plan or to an individual retirement account (IRA).
Employees who choose the installment option will receive equal payments at set periods of time for a specified number of years. For example, installment payments may be provided on a quarterly, monthly or annual basis for a period of five, ten, or 20 years.
Employees may use some combination of any of the options discussed above.
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