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.
You can withdraw your ASA 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 ASA and keep your pension benefit. If you qualify for a reduced pension benefit, and you end employment, you may withdraw your ASA without losing your pension. If you qualify for a full retirement, you may not withdraw your ASA without fully retiring.
When you withdraw your ASA, 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 Annuity Savings Account (ASA) will be valued the day after receipt of your application. If your application is received after 4 p.m., your ASA 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.
Taxable Portion - Direct Rollover
You may choose to have all or part of the taxable portion of your ASA 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 ASA 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 ASA 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 ASA 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 ASA 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 ASA
The IRS may charge an additional 10 percent federal tax penalty on your ASA if you are not 59 1/2 at the time of your distribution.
When you leave covered employment, you can leave your ASA 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 ASA 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 ASA 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.
DEATH OF A MEMBER
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 ASA 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 ASA 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:
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