Your AMC could offer investors the facility of maintaining and processing retirement plans.
This chapter contains the following sections:
This section contains the following topics:
One of the typical modes of retirement planning that is opted for by investors is investing in mutual funds through an Individual Retirement Account (IRA). The contributions of an investor into an IRA could be either taxed, or could be non-taxable, depending upon the type of IRA. The income on the assets in an IRA is typically tax-sheltered.
An investor obtains an IRA by purchasing or subscribing to a retirement plan under one of the retirement investment products offered by your company. Investment into an IRA could be increased over a period of time during the tenor of the plan, either through premiums or additional investments, or both. The investor could also be paid annuity, if such a feature is available in the plan.
Generally, a retirement age is set for a retirement plan, so that when the investor reaches the retirement age, withdrawals can be availed. After the retirement age is reached, no further additional investments or premiums can be contributed to the plan, but regular withdrawals and annuities, if applicable, are allowed. In the case of Roth IRA Retirement Plans, contributions can be made after retirement age. The age up to which contributions can be made is the retirement age at which withdrawals are required.
The contribution made by an investor into an IRA plan is directed into the specific fund opted for by the investor, in the underlying portfolio of funds defined for the product under which the plan was purchased.
The income derived from investment into the product portfolio could be reinvested back into the portfolio, or received as payment. The income could be taxed under applicable laws, or tax-sheltered, depending upon the tax laws of the country and the guidelines of the plan.
This chapter explains the manner in which you can configure Oracle FLEXCUBE Investor Servicing to process investment in IRA plans for an investor.
In Oracle FLEXCUBE Investor Servicing, you can maintain and process investments into IRA’s for an investor. This would involve the following processes:
You can maintain the different types of retirement products offered by your organization. Each type can be characterized by different attributes. You can define patterns of investment in IRA’s and fund portfolios for each product, by applying the specifications made for a product type.
Investment transactions into IRA’s can also be processed, such as the initial investment, additional investments, premiums and partial or complete withdrawals.
Distribution of the income derived from investment into the funds portfolio is also managed in the system. You can configure the system to process the income as desired by investors, either through reinvestment or payment, or a combination of both.
Funds
You must define IRA processing rules for each fund of your AMC into which you wish to allow IRA investments. These guidelines include whether IRA investments are allowed into the fund, and the volume limits that would apply to such IRA transactions into the fund.
For a detailed description of the rules maintained for funds, which pertain to IRA transactions, refer the chapter Setting Up Funds, in the Fund Setup user manual.
Product Types
You should maintain the different types of products that your AMC offers to investors, for IRA transactions. You can define different attributes for each product type.
Products
You must define each of the products that your AMC offers, with the processing guidelines that will apply to any plans or policies purchased under the product. As with product types, you can tailor the attributes of the products to suit your requirement
Typically, when you define a product, you associate the funds that would be part of the product portfolio. Processing guidelines for IRA transactions must be defined for each of the funds that you have associated.
When an investor buys an IRA plan in one of the retirement products floated by your AMC, you can maintain the details of the plan in the system. All the processing guidelines and details maintained for the product under which the plan was purchased will apply to the plan. You can, however, make appropriate changes as necessary, to the guidelines when you maintain the details of the plan in the system.
An investor who subscribes to a retirement plan subscribes an initial amount, which may or may not be increased during the tenor of the plan. Contributing additional investments during the tenor of the plan can increase in the investment amount, provided additional investments are allowed for the product in which the plan is purchased. If the product involves a product type for which premiums are also applicable, the investment can also be increased by premiums.
Therefore, the following inflow investments could occur into an IRA plan:
Earnings from the investment could be availed through partial or complete withdrawals, or through annuities, provided withdrawals and annuities are applicable for the product in which the plan is subscribed.
You can enter and process each of these transactions in the system.
Each of the transactions, when requested, could be directed into any of the funds opted for by the investor, in the product under which the plan was purchased. All the transaction processing guidelines specified for the product (and the plan) will be applied to the transaction. Also, the limits maintained for the fund in which the transaction is requested, will also be validated.
For further information refer to the Life and Endowment Product User Manual