Mandatory OBRA refers to a specific requirement for designated participants within a plan to make compulsory contributions, which are then subject to particular investment and distribution rules.
Key Aspects of Mandatory OBRA Contributions
For individuals classified under OBRA within a plan, there are specific requirements concerning their contributions, how those contributions are invested, and how they are eventually distributed.
Contribution Requirement
All participants who are classified as OBRA are obligated to make a mandatory contribution to the plan. This contribution is precisely 7.5% of their gross pay. This ensures a consistent and required level of saving for all classified participants.
Investment Restrictions
The mandatory contributions made under OBRA are subject to strict investment limitations. These funds must be invested solely in The Income Fund. This restriction ensures that the contributions are allocated to a specific, predefined investment vehicle, typically for stability or income generation, as implied by the fund's name.
Distribution Rules
When it comes to accessing these mandatory OBRA contributions, there are clear restrictions on how the funds can be disbursed. Distributions are exclusively limited to a lump sum payment. This means participants cannot receive periodic payments or distributions in other forms; the entire accumulated amount is paid out at once.
Summary of Mandatory OBRA Features
To provide a clear overview, the table below summarizes the core characteristics of mandatory OBRA contributions:
| Feature | Description |
|---|---|
| Participants | All individuals classified as OBRA within the plan. |
| Contribution Amount | Mandatory 7.5% of gross pay. |
| Investment Allocation | Restricted solely to investments in The Income Fund. |
| Distribution Method | Limited to a single lump sum payment. |
