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PERF Hybrid Plan Member Handbook: Receiving Benefits Before Retiring

This section explains the issues you’ll need to consider if you leave a covered position.

Withdrawing Your Defined Contribution (DC) Account

You can withdraw your DC balance as a distribution or rollover to another qualified retirement plan if you are no longer in a PERF-covered position.

These withdrawal amounts include:

  • the 3 percent mandatory contributions,
  • any voluntary contributions, and
  • all interest and earnings credited to your account.

If you still work full-time or part-time in any agency or department of your current employer you have not ended service. This applies even if your new position is not covered under PERF. If you return to work in a PERF-covered position within 30 days from the date you end service, you do not qualify for a distribution.

If you are vested and end service in a covered position for at least 30 days, you can withdraw your DC and keep your retirement benefit. If you qualify for a reduced retirement benefit, and you end employment, you may withdraw your DC without losing your retirement benefit. If you qualify for a full retirement, you may not withdraw your DC without fully retiring.


When you withdraw your DC, you will decide how to receive the payment. You must make a choice for the taxable portion as well as the non-taxable portion.

Your Defined Contribution (DC​) account 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 DC will be paid the next business day.

If you defer making a DC election at retirement, your DC will remain invested in your pre-retirement investment choices.

Mandatory DC contributions may have had taxes withheld. The employer-paid portion of the mandatory contributions are pre-tax and are taxable. Monies taken from your wages after taxes are deducted and post-tax contributions are not taxable and may be immediately recoverable. Please see Taxation on the DC for more information.

Taxable Portion - Direct Rollover
You may choose to have all or part of the taxable portion of your DC paid as a direct rollover into a qualified plan. Those plans include the 401(a), 403(b) or governmental 457(b) plan, or Traditional or Roth IRA.  All of these plans can accept your rollover. This option delays any taxes you owe on your DC balance, except for Roth IRAs.

If you roll over only part of the taxable amount, the part not rolled over is paid directly to you (minus the mandatory 20 percent withholding for federal income tax).

If you take a rollover distribution, you must complete the rollover within 60 days after you receive the distribution. 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.

Taxable Portion – Paid Directly to You
You may choose to have the entire taxable portion of your DC paid directly to you. PERF must withhold the mandatory 20 percent for federal income tax.

Non-Taxable Portion – Direct Rollover
You may choose to have all or part of the non-taxable portion of your DC paid as a direct rollover into a qualified plan. Those plans include a 403(b) plan, or Traditional or Roth IRA. If you 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 choose to have the total amount of the non-taxable portion of your DC paid directly to you.

You will receive a 1099-R after you receive your distribution. By law, Jan. 31 is the latest date 1099-Rs can be mailed.

PERF will withhold 20 percent from your withdrawal of the taxable portion paid to you or to your surviving spouse. This is done whether or not the IRS imposes a 10 percent penalty.

Tax Penalty – Early Withdrawal of DC

The IRS may charge an additional 10 percent federal tax penalty on your DC if you are not 59 1/2 at the time of your distribution.


When you leave covered employment, you can leave your DC invested with PERF until you are required, by IRS regulations to take a withdrawal. You can continue to invest in any of the eight available options and you will continue to receive an online quarterly statement.


If you have been inactive for five years, your account will be suspended. Inactive means no wages and contributions have been reported for a 5-year period. Account suspension means that you may automatically receive a disbursement of any funds in your account after five years, if the balance is less than $1,000. As an inactive member, you will still have access to your online INPRS account.

Your DC balance is available for withdrawal when you end service with your employer. Your withdrawal options include:

  • payment directly to you,
  • direct rollover,
  • or a partial rollover with the balance paid to you.

If your balance is less than $1,000, state law allows PERF to automatically distribute the DC balance to you without a request. 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.


In the event of your death, PERF must be notified so that your beneficiaries receive prompt payments.  PERF needs a copy of your death certificate to make any distributions of available DC balances or survivor benefits. Although employers may inform PERF of your death, the death certificate is still required. Employers do not always provide a member’s death notification.

INPRS will distribute the DC to the beneficiary or beneficiaries on file. The named beneficiary’s right to a benefit vests upon your death. A change of beneficiary designation must be on file with PERF before death, as a change received after your death is invalid.

If you name more than one primary beneficiary, and one of them precedes you in death, the benefits formula for the survivors may change. 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: 
Ann – 60 percent; Bob – 30 percent; and Carl – 10 percent

Ann dies before John. John forgets to complete a new beneficiary form. He dies with $10,000 in his DC account. Because Ann is deceased, Bob and Carl will now split the $10,000.

John’s choice to divide a deceased member’s portion – either prorated or equally – decides surviving beneficiary amounts for Bob and Carl.

If John chose prorated: 
Bob’s original percentage was 30 percent. Carl’s was 10 percent. That is a 3 to 1 ratio.
Bob gets three times the amount or 75 percent ($7,500).
Carl gets 25 percent ($2,500).

If John chose equally: 
Bob gets his 30 percent ($3,000) plus half of Ann’s ($3,000) or $6,000.
Carl gets his 10 percent ($1,000) plus the other half of Ann’s ($3,000) or $4,000.

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 PERF by mail or fax. Please provide your contact information.

Section Four: Important to Know

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