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RETIREMENT OPTIONS

 

Options Available Upon Termination or Retirement
(Click on a topic heading to view its summary)

  1. Leaving Your Account Balance in the Plan
  2. Lump Sum Distributions
  3. Rollovers
  4. Age 55 or Older Provision
  5. Regular Monthly or Quarterly Payments
  6. Annuity Purchases
  7. A Note About Outstanding Loans (If applicable to your agency)
  8. Timing of Distributions

Leaving Your Account Balance in the Plan (back to top)

  • You may leave your account balance in the Retirement Plan. However, you must comply with the Federal minimum distribution rule. Simply stated, this means that if you have not yet begun to take distributions, you must do so by the April 1st following the year in which you turn age 70½. If this applies to your situation, we will notify you of the minimum amounts you must receive each year.
  • There will be no further contributions allowed to your account. However, your account will continue to be credited with any investment gains or losses. Also, you will have the privilege of transferring balances among the different investment funds by accessing your account here.You will need to create a unique User ID and 4-digit numeric PIN as your password.
  • There are no administrative expenses charged for leaving your money in the Plan; however, you will have to pay any applicable investment fees charged by the funds in which you are participating. Also, your account will be charged the annual participation fee of $24.00.
  • You may request a distribution at any time* from any of the available options under this Plan.

    *Exception: If you leave your balance in the Plan and are later rehired by the same agency, you will not be able to take a distribution from that balance while you are actively employed by that same agency.

Lump Sum Distributions (back to top)

  • You may take out your entire balance in a single lump sum distribution.
  • The IRS requires a flat 20% Federal income tax withholding on the taxable portion of a lump sum distribution. If applicable, any mandatory state tax will also be withheld. If you choose to rollover your distribution to a rollover IRA or another Eligible Retirement Plan, taxation will be deferred until you take a distribution from wherever you rolled your funds. For information about rollovers, see the next section.
  • The Internal Revenue Service also imposes a 10% penalty tax on distributions from retirement plans prior to the time you reach age 59½. However, there are exceptions to the penalty. Some of these exceptions are: a distribution made as a result of your disability or death; a Qualified Domestic Relations Order (QDRO, which applies to divorce or other circumstances); or, if you are age 55 or older in the year in which you terminate. If you terminate employment prior to the year in which you attain age 55, you will not be exempt from the 10% penalty until you reach age 59½. Federal Form 5329 should be furnished to you by your tax preparer when filing your Federal Tax Return 1040.

Rollovers (back to top)

  • You are permitted to request that a total or partial rollover be directed to a rollover IRA (Individual Retirement Account) or to an Eligible Retirement Plan that will accept the rollover. Eligible Retirement Plans include: Qualified Plans, such as 401(a) or 401(k); 403(b) Tax-Sheltered Annuity Plans; and 457(b) Plans.
  • Most participants elect to rollover only the taxable portion of a distribution. Since there is no tax liability, except for earnings on the taxable portion, or penalty associated with receiving a non-taxable distribution, they elect to have the non-taxable portion paid directly to them.
  • However, now that certain rollover IRA's and certain Eligible Retirement Plans do accept non-taxable rollovers, that option is available to you. Be sure to check with your rollover company to see who is responsible for keeping records of your non-taxable funds for future tax purposes.

Age 55 or Older Provision (back to top)

  • After you terminate employment, you may want to leave your money in the Plan until you reach age 55 in order to take advantage of this special provision. When you are age 55 or older, you may elect to receive your distribution in partial payments, in whatever amount you choose, and you may elect to receive them as often as monthly. You are not required to take a payment every month, nor do the payments always have to be in the same amount. Since the amount and frequency of your payments can vary, the Plan Administrator will provide you with special forms for making your selection(s). Once you start receiving payments, you are still entitled to take out your entire balance at any time, or elect another optional form of payment under the Plan.
  • The mandatory 20% tax withholding rules apply to these distributions. If you terminate employment prior to the year you attain age 55, any payments you receive before age 59½ may be subject to the 10% tax penalty.

Regular Monthly or Quarterly Payments (back to top)

  • Regardless of your age, you may elect to receive one of the following two options. Once you begin receiving payments under either option (1) or (2) below, you may not switch to another option unless you are age 55 or older and elect the "Age 55 or Older Provision" above. Making a change will cancel your current tax withholding election and require the Plan Administrator to withhold 20% federal income tax from each future payment. Once you have made this change, you may not revert back to your initial election.

    1. If your total vested account balance is at least $50,000, you may elect to receive either monthly or quarterly payments that will continue for exactly 10 years. If you select monthly payments, your first payment will be 1/120th of your balance, the next will be 1/119th of your balance, then 1/118th, etc., until all 120 payments have been made. If you select quarterly payments, your first payment will be 1/40th of your balance, the next 1/39th, then 1/38th, etc., until all 40 payments have been made.
    2. You may elect to receive regular monthly payments of at least $500 (or regular quarterly payments of at least $1,500) until your account balance is exhausted. Initially, you may specify the dollar amount of each payment (subject to the above minimums),but the dollar amount cannot be changed once payments begin unless you are 55 or older..
  • Under IRS regulations, equal (or almost equal) payments that continue for a period of at least 10 years are not subject to mandatory 20% tax withholding. Therefore, if you elect option (1) above (or if you elect option (2) and your payments are expected to last at least 10 years), your tax withholding rate will only be 10%, unless you wish to have no taxes withheld. To elect out of tax withholding, ask the Plan Administrator for the election form and related information. Please be advised that the 10% penalty tax (described on page 1) may still apply to your particular situation under these options.

Annuity Purchases (back to top)

  • Depending on which monthly annuity option you choose, purchasing an annuity provides you with a lifetime of monthly income payments and the option of providing an income (or lump sum) to your beneficiary after your death.
  • If you elect to purchase a monthly annuity benefit, bid quotes will be taken from several insurance companies (currently John Hancock, Metropolitan Life, and Principal Mutual Life Insurance Companies) so that you may choose the best offer. You may purchase your benefit from any one of these companies. Neither the mandatory 20% tax withholding nor the 10% penalty tax applies to annuities. You will arrange with the insurance company whether to have taxes withheld from your monthly payments.
  • Upon your selection, a check will be disbursed from your retirement account and mailed directly to the chosen insurance company. You will receive your monthly check directly from the insurance company and, at the end of the year, you will receive from the insurance company a Form 1099R showing the total benefit paid you, any Federal income tax withheld, and any non-taxable portion, if applicable.
  • All annuities will provide a lifetime monthly benefit for you, the purchaser of the annuity. There are several types of annuities from which to choose.
    Monthly annuity options are:

    The Life Only Annuity provides lifetime annuity payments for the participant who purchases the annuity, with no benefit payable to a beneficiary after the participant's death. (back to options list)

    The 5, 10, 15 & 20 Year Certain and Continuous Annuities provide the participant who purchases the annuity with a lifetime benefit. If the payments made have not already exceeded the guaranteed period, the beneficiary will be entitled to receive the same monthly benefit to complete the guarantee period. For example, if a participant selects the 20 Year Certain and Continuous Annuity and dies after 12 years, the beneficiary would receive the same monthly payments for the next 8 years to complete the guarantee period. If the participant chooses this same 20 Year Certain and Continuous Annuity and lives for 20 or more years, there would be no benefit payable to the designated beneficiary. (back to options list)

    A Joint Survivor Annuity will provide a lifetime benefit for the participant who purchases the annuity. If the purchaser should die, a percentage of that lifetime benefit will continue to the designated Joint Annuitant. There is no benefit payable after the death of both parties. The participant selects the percentage: For example, if a participant selects a "Joint and 50% to Survivor" annuity that provides $500 a month to the participant for life, after the death of the participant, the Joint Annuitant, if living, would receive 50% of the $500, or $250 a month, for his or her lifetime. Had the participant selected a "Joint and 100% to the Survivor" annuity, the Joint Annuitant would receive the full 100%, or $500 per month for life. (back to options list)

    A Cash Refund Annuity provides lifetime annuity payments for the participant. If the participant should die before having received total annuity payments equal to the amount of money used to purchase the annuity, the excess will be paid to the designated beneficiary in a lump sum. (back to options list)

    A Variable Annuity is invested primarily in a portfolio of equity securities and, therefore, provides lifetime annuity payments to the participant which fluctuate with the value of those securities. The participant may select from several types of variable annuities with "certain and continuous" or "joint and survivor" features for the designated beneficiary. (back to options list)

A Note About Outstanding Loans (If applicable to your authority)
(back to top)

  • If you terminate employment and have an outstanding loan balance, the balance of that loan becomes immediately due and payable. Unless the loan is repaid in full prior to termination, the remaining loan amount is treated as a distribution from the Plan and is subject to taxation. This will occur whether or not you request a distribution of your vested retirement account balance. The Form 1099R will be forwarded to you and the taxable information will be reported to the Internal Revenue Service. Also, you should be aware that unpaid loans will not be eligible for rollover. However, if you do not withdraw your account balance from the Retirement Plan, you may be able to make arrangements to continue making loan payments. Please contact the Plan Administrator (Tel: 1-888-801-3534) for special instructions or a loan payoff quote. For tax implications, you should consult your tax advisor.

Timing of Distributions (back to top)

  • Distributions are processed after final plan contributions and loan payments are received by the Plan Administrator from your agency. Since final contributions and loan payments are usually received from your agency during the month that follows your termination month, you will typically receive your distribution at the end of the month following the month in which your termination date occurs.

    Once final contributions are received, distributions are processed every business day.

    Checks are mailed within two business days from ADP Retirement Services in Salem, New Hampshire. Please allow adequate time (an additional 3 to 5 business days) for mail delivery.

  • To initiate a distribution or for additional information about these opportunities/options, please consult with the appropriate person at your agency. To receive any type of distribution from the Plan you must sign and complete Form #0150. The form is available on this site as a PDF file (click here to open, download or print), or from your agency in traditional paper format.
 
 
 
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