My Choice: Retirement Savings Plan Member Handbook (for Political Subdivisions): Retiring from the Plan
CALCULATING YOUR PLAN BENEFITS
You become 100 percent vested when you have five years of service. For normal retirement this is age 62 plus five years of participation. Full vesting also occurs if you die in the line of duty.
- One year = 20 percent
- Two years = 40 percent
- Three years = 60 percent
- Four years = 80 percent
- Five years = 100 percent
YEARS OF PARTICIPATION
Only full years of participation count toward vesting in the employer contributions. For example, if you work four years and 10 months you would receive 80 percent of the employer share (variable) portion. You need to review your service time before separating from service.
You may think of the last day you work or the last day you were on payroll as your retirement date, but INPRS uses an “effective date” for retirement benefits. The effective date of your retirement is the first day of the month after your last day in pay status.
EXAMPLE: Your last day in pay status is Aug. 2. Your effective date of retirement is Sept. 1.
My Choice: Retirement Savings Plan Payment Methods
If you meet age and years of participation requirements and you have at least $15,000 in your My Choice: Retirement Savings Plan account balance, you may annuitize it. Your rollover account may be used in the calculation of the minimum account balance. That is, you may take this money as a lifetime monthly annuity payment. You can also choose to receive a distribution of the funds when you retire from the My Choice plan or wait to receive your money until a later date.
Your My Choice: Retirement Savings Plan will be valued the day after receipt of your application. If your application is received after 4 p.m., it will be valued the next business day. It will be transferred to a Fixed Value Fund in order to minimize loss while your request is processed. However, you may transfer your monies between investment options at any time before we receive your application. You may transfer monies via phone or online.
Any trailing contributions and amounts remaining in your account following any cancellation of the annuity will be moved to the Money Market Fund. You may also reallocate your money to any of the available investment options under the plan.
This includes the mandatory 3 percent and any voluntary contributions, any rollover savings account contributions, the vested portion of the employer share (variable) contributions and any earnings. The beneficiaries may elect to have the account paid as a:
- lump sum,
- direct rollover to another eligible retirement plan, or
- an annuity if the account balance is at least $15,000 and the beneficiary or spouse is at least age 62.
If you do not list any beneficiaries, or if your beneficiaries precede you in death, the account will be paid to your surviving spouse, dependents or estate.
If you die in the line of duty while in service but you are not fully vested in the employer share (variable) contributions, the account is deemed fully vested. This means your designated beneficiaries will receive 100 percent of all amounts in your account.
If you fail to inform PERF of beneficiary changes, it may mean payment will be made to someone who is no longer your choice to receive your balance. Make the change via your online account.
INPRS considers your onset date to have occurred while serving in a covered position if the onset date is while you were:
- receiving salary (your onset date must be prior to your last paycheck date);
- receiving employer-provided income protection benefits;
- on leave under the FMLA; or
- off work receiving worker’s compensation benefits
Please contact INPRS if you have any questions about establishing eligibility for disability benefits.
NOTICE: INPRS CANNOT process your disability application without a copy of your Social Security award letter with the onset date.
To the extent that you are vested with a minimum account balance of $15,000, you may elect to have a withdrawal paid as:
- a lump sum,
- a direct rollover to an eligible retirement plan, or
- as a monthly annuity.
If you have met the Social Security disability requirement, you may request a distribution online. You may also speak to a Customer Service Representative.
All voluntary distributions for disability and rollover withdrawals require 100 percent of the available amount to be withdrawn.
You must submit your elections using the PERF and TRF Retirement Application. You can access the retirement application by downloading it here or by calling (888) 286-3544.
Disability withdrawals require 100 percent of the available amount to be withdrawn.
Payments are made using direct deposit. On the same day each month, your payment will be deposited directly into the account you choose. You will receive a yearly notice of deposits. Your money cannot be lost or stolen. There are no delays due to mishandled mail or incorrect addresses. Please contact us at (888) 286-3544 to request a form be mailed to you, or download it here.
You can withdraw the balance of your account and receive a lump sum distribution or roll the funds to another qualified retirement plan if you are no longer working in a My Choice-covered position. If you re-employ in a My Choice-covered position within 30 days, any distribution is void. You may be required to pay back the distribution, plus interest. You should notify INPRS immediately if you become re-employed within a 30-day period.
If your account balance is more than $1,000 ($1000.01 or more) and you do not request a distribution, payment will be deferred until March of the year after you turn 70½. At that time, a Required Minimum Distribution (RMD) will be processed. Rules about the RMD take precedence over any of the automatic cashout or rules regarding suspension.
If you have more than $1,000 or more than one year of service, your account balance will remain in the My Choice: Retirement Savings Plan. Your money will remain in the account until you elect a final distribution, partial withdrawal, or until a minimum distribution payment is required. If your account balance falls below the required minimum balance to remain in the plan, you will receive the money in a lump sum.
If you are vested with a balance, your distribution options are:
- a lump sum (with or without a rollover),
- a direct rollover to another eligible plan, or
- a monthly annuity if you are age 62 with five years of participation and have an account balance of at least $15,000.
Taxation on your My Choice: Retirement Savings Plan
Your decision on how to receive your money can have a huge impact on your taxes. We urge you to consult with a tax advisor. Customer service representatives can explain options to you, but cannot offer tax advice. The information below is included to help you and your advisors with federal tax terms as they apply to My Choice: Retirement Savings Plan benefits.
Post-tax contributions are considered “tax basis.” Tax basis refers to the portion of your contribution that was taxed at the time the money was paid into your account. The employer’s contribution is not taxed and is not considered tax basis. After you retire, INPRS uses the 1099-R form to report your post-tax (tax basis) contribution to the Internal Revenue Service (IRS) as non-taxable. You may recover your tax basis under certain IRS rules found in IRS publication 575.
You can choose to receive a lump sum distribution of your My Choice: Retirement Savings Plan. The entire taxable portion of your distribution is reported as ordinary income. Your tax basis is recovered upon distribution when you select a lump sum. This means your total basis is reported as non-taxable income.
If you annuitize, you recover your basis tax free over the period you are expected to receive the payments. This is based on your age at the time the annuity starts and is calculated based on a table provided by the IRS. The amount of each payment that is more than the part that represents your basis is taxable.
Read more about tax basis here.
If INPRS receives contributions after you have requested a final distribution and the total account balance has been paid, INPRS will accept the contribution and pay another distribution using your previous distribution instructions. However, if these contributions are less than $1,000, the distribution will be paid directly to you in a lump sum.
Leave Your My Choice: Retirement Savings Plan Invested: If you end employment, you may choose to leave your funds invested with PERF. Based on IRS regulations, you must begin distribution at age 70 1/2. Your funds will remain invested according to your directions until you elect to receive your funds.
INPRS is required to withhold income taxes on distributions. INPRS must withhold 20 percent for federal taxes from all distributions made directly to you. Make sure to complete the tax withholding forms when you apply for benefits.
Applying for Retirement Distribution
When you are ready to apply for a distribution, select Member Login to access your online account. Submitting your application online is quick and easy.
Section Six: After Retirement