TRF Member Handbook: Receiving Benefits Before Retiring

Withdrawal of Your DC Balance

If you are no longer in a TRF-covered position and you are not receiving a retirement benefit or a disability retirement benefit, you can withdraw your DC balance.

You can withdraw money from your DC if you:

  1.  do not plan to return to a TRF- or PERF-covered position.
  2. left your TRF- or PERF-covered position more than 30 days ago.
  3.  buy creditable service in another governmental retirement plan. You must be vested for this option.

Withdrawal of Your DC without Employer Separation

If you are a member of TRF or PERF who is not age and service eligible for a retirement benefit, who is:

  1. no longer working in TRF or PERF-covered service with an employer;
  2. actively working with the same employer; and
  3. working in a non-TRF or non-PERF covered position,

you may suspend and withdraw the amounts in your DC if you are at least 60 years of age at the time you apply for the withdrawal.

For example, Josh has worked in a PERF-covered position for four years. He is promoted to a non-PERF covered position with the same employer. When Josh is 60 years of age, he may withdraw his DC so long as he's not working in a PERF or TRF-covered position and isn't age and service eligible to receive a PERF or TRF retirement benefit.

Getting Your Money

To withdraw money from your DC, you can log in to your account. Or, you can call (844) GO-INPRS. We are available Monday through Friday from 8 a.m. to 8 p.m. EST.

If you leave a TRF-covered position before you have 10 years of qualified service, your membership in the fund will be automatically suspended five years after you leave that position. Account suspension means that you may automatically receive a disbursement of any funds in your account after five years, depending on the balance.

If you return to a position covered by TRF or PERF, the balance that was moved to the employer reserve will be credited back to your DC. At any time, you or your beneficiary can withdraw the balance in your account. However, once credited to TRF, no more interest or investment earnings will accrue to your account.

If you are employed in a PERF-covered position, you will not be able to withdraw your funds from your TRF DC.

If you have $1,000 or less in your Defined Contibution (DC) Account, INPRS can, by law, suspend your membership after only five years of leaving your TRF-covered position. You will be sent the balance of your DC. If your account is greater than $1,000, it will continue to be invested as you choose, and gains and losses will continue to accrue. We may charge an administrative fee to the suspended account.

Note to members who are qualified for a reduced retirement benefit. As of July 1, 2011, you may still withdraw your DC, even if you have not worked for more than 30 days in a covered position. You will not forfeit your retirement benefit and you will not have to take a reduced retirement.

Penalties

If you take money out of your DC before you retire, you will pay a required 20 percent federal tax. If you are under age 59 ½, you may also have to pay a 10 percent tax penalty.

You will not pay federal taxes if you roll over money to an IRA or other qualified retirement plan. For more information, see the Taxes section.

Buying Service in another Plan

You can take money out of your DC to buy service credit in another government retirement plan and you may only withdraw the exact amount. The money must be paid as a “trustee-to-trustee” transfer to the other governmental plan. This means INPRS would transfer the funds to the other government plan and you would not receive a cash payment.

If you should return to a TRF-covered position, you would need to buy back the service credit from the other government plan to have it count toward your retirement.

Taxation on the DC (applicable to all active accounts on Jan. 1, 2018 and thereafter)

Your choice about how to distribute your Defined Contribution (DC) account can have important tax implications, and we urge you to consult with a tax advisor. PERF can explain your options but cannot offer tax advice. The information below will help you and your advisors with federal tax rules as they apply to PERF benefits.

Contributions to your DC made with after-tax dollars are referred to as “cost basis.” Mandatory contributions paid by your employer were not taxed when they were paid so they don’t create “cost basis.” At retirement, any after-tax contribution (your cost basis) is reported by PERF as non-taxable on the IRS Form 1099-R. The 1099-R is issued to retired members and the IRS. It is important to note that your cost basis is recovered under very specific IRS rules. You can choose to receive a total withdrawal of your DC when you begin receiving your monthly retirement benefit. This will include your total cost basis that is included in your DC.


TRF Member Handbook: Important to Know