My Choice: Retirement Savings Plan Member Handbook for Local Government Employees: Receiving Benefits Before Retiring
When you separate from employment, the non-vested portion of your employer contributions will be forfeited. Forfeited, non-vested money will not be reinstated to your account even if you return to My Choice-covered employment.
You are considered inactive if your account does not receive contributions for 5 years because you no longer work in a covered position.
We will confirm your address to make a distribution to you from your account. If you or your beneficiary are not located, the money in your account will continue to be invested according to your investment allocations. If your balance is less than $1,000, the balance of your account will be automatically distributed to you once your account is inactive.
Leaving My Choice-covered employment means that you need to make important decisions about your retirement savings. This section explains the issues you will need to consider if you leave a covered position and end employment.
Withdrawing from your My Choice: Retirement Savings Plan Account
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 PERF-covered position. If you re-employ in a PERF-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.
The withdrawal amounts include:
- the 3 percent fixed contributions,
- voluntary contributions,
- all interest and earnings credited to your account, and
- vested percent of employer’s contributions.
When you withdraw, you must decide how you will receive the payment. You must make a choice for the taxable part as well as the non-taxable part.
Your My Choice: Retirement Savings Plan will be paid out the same day if submitted prior to 4 p.m. on the Retirement Application Center. If your application is received after 4 p.m., your account will be paid the next business day.
If you are age 62 with at least 5 years of participation, refer to the Retiring from the Plan section for other options.
The tax status of your mandatory contributions depends on whether or not taxes were withheld on them before the contributions were made to PERF. Any employer-paid contributions are pre-tax. Contributions you’ve paid may have been deducted before or after taxes were withheld.
You may elect a distribution at any time after you have separated from employment for 30 days. Distribution requests can be made on the INPRS secure website or by calling (844) GO-INPRS. If your request is received before 4 p.m. EST, it will be processed the same day. Checks will be issued and mailed within two to three business days.
Taxable Portion – Direct Rollover
You may elect to have all or part of the taxable portion to be paid in the form of a direct rollover into an eligible 401(a), 403(b) or governmental 457(b) plan, or Traditional or Roth IRA. The plan must have terms allowing it to accept the rollover on your behalf.
Except in the case of a Roth IRA, this option defers taxes you owe on your balance.
If you choose to roll over only part of the taxable amount, the portion not rolled over is paid directly to you. The amount you receive will be less the mandatory 20 percent withholding for federal income tax.
Taxable Portion – Paid Directly to You
You may elect to have the total amount of the taxable portion of your account paid directly to you. This amount will be less the mandatory 20 percent withholding for federal income tax.
Non-Taxable Portion – Direct Rollover
You may choose to roll over all or part of the non-taxable portion of your account. You may elect up to two financial institutions to receive your funds. The institutions will receive the money in the form of a direct rollover into an eligible qualified plan, 403(b) plan, or Traditional or Roth IRA. The plan must have provisions allowing it to accept the rollover on your behalf. If you choose to roll over only part of the non-taxable amount, the portion not rolled over is paid directly to you.
Non-Taxable Portion – Paid Directly to You
You may elect to have the total amount of the non-taxable portion of your account paid directly to you.
You will receive IRS Form 1099-R. The 1099-R is used to report the distribution of retirement benefits such as annuities or other retirement plans. The 1099-R will be postmarked by January 31 the year after you receive your distribution. By law, this is the latest date 1099-Rs can be mailed.
INPRS is required to withhold federal income tax from any taxable distribution. If a distribution is eligible to be rolled over, INPRS must withhold 20 percent of the taxable portion paid to you or to your surviving spouse, unless you have requested a direct rollover to a qualified retirement plan. Adjustments may be made for payments made to survivors under special circumstances. State taxes will be withheld if required by the state or requested by you or your surviving spouse.
If you request a direct rollover distribution, you must complete the rollover within 60 days of the date on the distribution check. If you do not roll over your contribution within 60 days, you may owe taxes and/or penalties unless you qualify for a waiver. Please consult your tax professional for waiver qualifications.
Tax Penalty – Early Withdrawal of your My Choice: Retirement Savings Plan
Death of a Member
In the event of your death, INPRS must be notified so that your beneficiaries receive their payments promptly. INPRS needs a copy of the death certificate to make any distributions of available balances. Although employers may inform INPRS of your death, the death certificate will still be required. Employers do not always provide a member’s death notification.
INPRS will distribute the funds to your designated beneficiaries. The named beneficiary’s right to a distribution vests upon your death. Beneficiary changes received after your death cannot be honored.
If you name more than one primary beneficiary, and one of them precedes you in death, the amounts your other beneficiaries receive may be affected. If you don’t file a new beneficiary designation form, the remaining primary beneficiaries will receive a portion of the deceased primary beneficiary’s share based upon the remaining primary beneficiaries’ percentages.
John lists three beneficiaries and the percentages he wants them to receive:
Make sure you review and update your beneficiary choices regularly.
If you call to report a member’s death, please provide your contact information. We may need to reach you at a later time. You can also report a death by sending the death certificate to INPRS by mail or fax. Please include your contact information.
Section Four: Important to Know