Leaving SURS – Retirement Savings Plan (RSP)
Steps
- Review Options
- Select Option
- Apply for Distribution (If desired)
- Paperwork Processed and Forwarded to Provider(s)
Review Options
Although you may intend to stay with a SURS-covered employer until retirement, the time may come when your personal situation prevents you from doing so. The following are your options should you leave the system entirely:
- Leave funds on file: You may elect to leave your funds on file. You can manage your investments just as if you were an active participant; however, no additional contributions may be made so long as you remain in terminated status. You may elect to take a distribution at a later date; however, a distribution must be made to you by the April 1st following the year you reach 70½ if born on or before June 30, 1949, or age 72 if born on or after July 1, 1949 if you are not employed with SURS or a state of Illinois reciprocal system at that time.
- Apply for a retirement benefit: If you meet the age and service requirements for a retirement benefit, you may apply for retirement benefits upon termination of employment. If you have not met the age requirement, you may leave your funds on file until you become eligible for retirement benefits. You must begin the annuity by the April 1st following the year you reach 70½ if born on or before June 30, 1949, or age 72 if born on or after July 1, 1949 if you are not employed with SURS or a State of Illinois reciprocal system at that time.
For more information read the Retirement Savings Plan Life Event.
- Receive a separation refund: You may receive a one-time lump sum distribution. No partial distributions are allowed. By accepting a distribution, your claim to future benefits will be forfeited.
- You may elect to receive your refund as a lump sum paid directly to you.
- The IRS requires a minimum of 20% be withheld for federal income tax. You may elect to have additional withholdings.
- Your refund is subject to an IRS 10% early withdrawal penalty unless:
- You are over age 59 ½;
- You terminated employment after age 55;
- You have medical expenses large enough to be deducted on Form 1040, Schedule A; or
- You are a public safety employee who terminated employment after age 50.
Note: The 10% penalty is not withheld by SURS. It is calculated on IRS Form 5329 to be filed with your federal tax return for the tax year in which your refund is paid.
You may defer taxation by rolling the taxable portion of your refund directly from the RSP provider(s) to an IRA, a qualified 401(a) retirement plan, a 403(b) plan, or a 457 plan. If you arrange a trustee-to-trustee transfer, there will be no federal income tax withheld. Most rollovers are not subject to federal income tax. However, they are subject to taxation, according to IRS regulation, at the time of withdrawal. Rollovers to Roth IRAs are taxable at the time of the rollover.
You should consult a tax advisor with questions regarding a rollover or taxation of your distribution.
You will receive a 1099-R to file with your federal tax return the January following the tax year in which your refund is paid. Your refund is not subject to state of Illinois income tax.
Select Option
If you elect to leave your funds on file, no further action is required on your part. You will receive quarterly Unified Statements showing the value of your account. Please keep SURS updated with any address changes.
If you wish to apply for a retirement benefit, please refer to the Retirement Life Event for further information.
For more information read the Retirement Savings Plan Life Event.
If you wish to receive a separation refund, continue to Step 3.
Apply For Distribution (If Desired)
To receive a distribution, you must have terminated your employment from all SURS-covered employers. If you wish to withdraw your funds from SURS, you must complete a withdrawal form. Depending upon your citizenship status, you may also be required to submit an IRS Form W-9 or W-8BEN.
To begin the Separation Refund process:
- Dial Toll Free: 800-275-7877
- Dial Direct: 217-378-8800
Before any paperwork can be sent to you, your employer must submit the certification of your employment, the date of termination of employment, and all final payroll information if not already on file. In addition, SURS must also receive all applicable state matching funds. Upon receipt of all required information, SURS will send paperwork to you to apply for a distribution.
You should contact your employer to determine their resignation process and complete any required paperwork.
Once SURS receives the completed withdrawal form, SURS will forward the forms to your provider(s) within two working days. Contact your provider(s) for their processing times.
Paperwork Processed and Forwarded to Provider(s)
Delays in Finalizing Refund Claims: There are several reasons why a claim may not be finalized within the average processing time. The following are the most common:
- Receipt of employer information: The response time of your former employer affects the processing time required to process your claim. If the information reported by your employer is inconsistent with the information SURS has on file, SURS will contact the employer for clarification.
- Response from member: If SURS requests additional information or paperwork from you, it must be submitted before your separation refund can be processed.
- Receipt of state matching funds: All applicable state matching funds must be received and posted to your account. If you have less than five years of service credit, you will not receive the state matching funds as part of the distribution.
General Information
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Members With Less Than 5 Years of Service Credit |
|
|
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Retirement Savings Plan |
|
Member Contribution |
Yes |
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Employer Contribution |
No |
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Interest/Return |
Plus/Minus Investment Return |
|
Members With 5 or More Years of Service Credit |
|
|
|
Retirement Savings Plan |
|
Member Contribution |
Yes |
|
Employer Contribution |
Yes |
|
Interest/Return |
Plus/Minus Investment Return |
Frequently Asked Questions
How do I apply for a Distribution?
Call SURS toll free at 800-275-7877 or dial direct at 217-378-8800. You will speak to a SURS Benefits Counselor who will be happy to assist you in initiating the refund application process.
How much will I receive if I take a Distribution?
If you are in the Retirement Savings Plan (RSP) and have fulfilled all RSP eligibility requirements:
If you have less than five years of service credit, you will be eligible for your member contributions and investment return on them.
If you have five or more years of service credit, you will be eligible for the employer contributions and investment return on them, as well as your member contributions and investment return on them.
Am I required to take a Separation Refund if I terminate my employment?
No, you may leave your funds with SURS. However, if you are terminated with all SURS-covered employers and all Illinois Retirement Reciprocal Systems upon the April 1st following the year you attain age 70½ if born on or before June 30, 1949, or age 72 if born on or after July 1, 1949. SURS is required to distribute your funds, based on IRS guidelines. This payment must be made to you, either as a lump sum distribution or a monthly annuity, whichever you qualify for, with federal income tax withheld.
How long does it take to receive a Distribution?
If you are in the Retirement Savings Plan (RSP), SURS must have your termination report from your employer, last payroll information, and the state matching funds before sending the termination information to the provider(s). After your completed Distribution Election form has been received by SURS, your separation refund will be sent within one to two weeks.
Can I take a partial Distribution or borrow from my SURS account?
No. If you are an active employee, you cannot access your account in either of these ways. If you have terminated your employment, you may take a distribution, but it will be for the full eligible refund amount.
Can I “roll over” my Distribution?
Yes, all or part of the payment that you will receive from your SURS account may be eligible for rollover by you or your Plan Administrator (SURS or your Retirement Savings Plan (RSP) Service Providers) to a Traditional IRA or other eligible employer plan. For more information regarding rollovers, please visit the IRS website(www.irs.gov) or view the Special Tax Notice on this website.
What does “vesting” mean in relation to my Distribution?
You are entitled to (vested in) a SURS retirement annuity if you have been credited with the minimum number of service credit years required for vesting.
- Defined Benefit Plan members who first began participation prior to January 1, 2011, are vested with five years of service credit.
- Defined Benefit Plan members who first began participation on or after January 1, 2011, are vested with ten years of service credit.
- Retirement Savings Plan members are vested with five years of service credit regardless of when participation began.
By accepting a distribution (separation refund), your claim to these future benefits is forfeited. You should contact SURS for specific information regarding the retirement benefit and the date it can begin. If you have at least one year of service credit with another Illinois retirement system (even if you have less SURS service credit than is required for you to be vested for a SURS retirement benefit), it may still be to your advantage to leave your funds on deposit with SURS and retire under the Reciprocal Act. For further information, contact SURS.
Is a Distribution taxable?
It is likely that all or a portion of your distribution will be taxable. SURS is required by the IRS to withhold federal income tax on cash distributions of $200.00 or more.
In addition, if you have not yet attained the age of 59½, or you are less than age 55 at termination date, your refund may be subject to an IRS early distribution tax of 10% of the taxable portion. The 10% tax is not withheld by SURS. The tax is calculated on Form 5329, to be filed with your federal tax return for the tax year in which you receive your refund.
For more detailed information, visit the IRS website or view the Special Tax Notice on this website.
Is it possible to repay my Distribution at a later date?
If you take a Distribution and then return to become an active member of SURS or a reciprocal system, you may reinstate your service credit after contributing for at least two years. You will need to repay the amount of the original distribution.