The Internal Revenue Service (IRS) generally requires that a member with an interest in a retirement benefit must take a Required Minimum Distribution (RMD) from that benefit. This must be done by April 1 of the calendar year following the year in which you attain 70½ years of age, or by April 1 following the year in which you retire, whichever is later.
If you’re still working in a covered position, or for a PERF or TRF-sponsored employer through Dec. 31, you’re not required to take an RMD. When you leave employment, you will be required to take an RMD. If you do not take an RMD, you may be fined by the IRS due to a late distribution. The amount could be up to 50 percent.
Visit the IRS website for a list of frequently asked questions (FAQs) on RMDs.
Three separate circumstances may require a member to take an RMD. Each circumstance requires a different process.
1) You will receive an RMD if you:
- have at least 10 years of creditable service and are no longer working in a covered position,
- have not begun your retirement benefit, and
- will be age 70½ by Dec. 31.
2) You will receive an RMD if:
- you have less than 10 years of creditable service and are no longer working in a covered position, or with a PERF or TRF-sponsored employer, and otherwise not eligible to receive a retirement benefit and you will be age 70½ by Dec. 31, or if
- your deceased spouse would have been age 70½ by Dec. 31, and did not take a distribution from his or her Defined Contribution Account (DC) and you are the beneficiary.
3) You will receive an RMD if you:
- deferred receipt of your Defined Contribution Account (DC) at retirement and will be age 70½ by Dec. 31.
The distribution cannot be reversed once it is processed and may result in significant taxable income in the year it is distributed.
Failure to comply with RMD requirements may result in interest and penalties from the IRS. See 35 IAC 13-1-1 for more details on the RMD process.
If you plan to withdraw (e.g., rollover, lump sum) your DC account in the calendar year in which you reach age 70½ you may be subject to a required minimum distribution and federal income tax. Please consult your financial advisor before taking action.
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