My Choice: Retirement Savings Plan Member Handbook: Retiring from the Plan
CALCULATING YOUR PLAN BENEFITS
You become 100 percent vested when you end employment, 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.
If you meet age and years of participation requirements and you have at least $15,000 in your 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 account will be valued the day after receipt of your application. If your application is received after 4 p.m., your account 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.
The beneficiaries will receive your balance which 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, the beneficiary or survivor will receive 100 percent of all amounts in your account.
BENEFICIARY PAYMENTS OR SURVIVING SPOUSE
The beneficiary/survivor of a deceased member has the option to receive a lump sum payout of the account or annuitize it.
A survivor may make separate elections for the My Choice: Retirement Savings Plan and RSA balances. A survivor may receive a lump sum payment for the RSA and annuitize the account as long as the balance to annuitize is at least $15,000. The survivor must be at least 62 years of age.
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.
*Receiving a salary includes your last check date. It does not include any checks you received more than 30 days after the last day you were paid. This includes being paid for physical work, sick time, used compensatory time, or while on other leave or vacation.
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
- 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.
If you are disabled or you have a rollover account balance, you are eligible for withdrawals:
- disability withdrawal – paid in a lump sum, a direct rollover to another eligible plan, or as a monthly annuity
- rollover distribution – paid in a lump sum, a direct rollover, or a monthly annuity at normal retirement age (age 62 + five years of service)
All voluntary distributions for disability and rollover withdrawals require 100 percent of the available amount to be withdrawn.
If you meet age, service and minimum balance requirements, 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.
If you are a member of the My Choice: Retirement Savings Plan and you end service and later return to state employment in a position covered by the plan, you are entitled to receive credit for your years of participation in the plan before you ended service. Your annual variable (employer share) contribution amounts are forfeited and will not be restored to your account upon rehire.
New employees who elect the My Choice: Retirement Savings Plan and then rehire or return to state employment must continue membership in the plan, not the fund (PERF Hybrid).
NON-VESTED MEMBERS (LESS THAN ONE YEAR OF PARTICIPATION)
If you are terminated with less than one year of participation in the My Choice: Retirement Savings Plan and your account balance is $1,000 or less, you cannot defer your account balance. If you do not request a distribution election within two years after your last day in pay, balances are automatically paid to you. Payment is made in a lump sum directly to you (minus the 20 percent federal income tax withholding and state and local taxes).
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.
VESTED MEMBERS (HAVE ONE OR MORE YEARS OF PARTICIPATION)
If your vested account balance is less than $1,000 and you have more than one year of participation, the account will follow the 20-year suspendable account process.
If you have more than $1,000 or more than one year of service, your account balance will remain in the 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 to your account 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, PERF 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 the funds in your account. The entire tax basis is recovered since there is not a recurring payment. The annuity recovery will be based on your age. If you annuitize your account, the basis allocated to the monthly annuity payment is divided up and recovered over a set number of monthly payments. The IRS determines the rate of recovery. A part of each monthly payment will remain non-taxable as long as the basis remains.
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. If you were paid a disbursement in error, INPRS will work to restore the money.
Leave Your Plan Invested: If you end employment, you may choose to leave your plan invested with INPRS. 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 federal taxes on monthly payments unless you choose not to have taxes withheld. Make sure to complete the tax withholding forms when you apply for benefits.
Applying for Retirement Distribution
When you are ready to apply for retirement benefits, select Member Login to access your online account. Submitting your application online is quick and easy. You may also download a copy of the application here.
Section Six: After Retirement