Current Pension Topics: Vesting and Withdrawing QPP Funds at TRS

Current Pension Topics:
Vesting and Withdrawing QPP Funds at TRS

Following is some more vital information as published by the Teachers' Retirement System of the City of New York. I welcome your questions.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net.

If I change job titles, how would it affect my TRS membership?

If your new job is another TRS-eligible position, your TRS membership would not be affected. If your new job is not a TRS-eligible position, under certain circumstances, you may be eligible to transfer your TRS membership to another retirement system or you may become a transferred contributor and remain in TRS.

What does vested status mean, and when would I become vested?

You are considered vested when you have completed enough credited service to receive a reduced retirement allowance. This occurs when you have completed at least five years of membership service. Vested members would become eligible to retire upon meeting the applicable age requirements.

Comment: The value of a vested/reduced retirement allowance is directly related to the number of years you must wait before being placed on the pension payroll. Please contact me prior to making a decision to vest.

May I withdraw my QPP funds after separating from service?

You may withdraw all your contributions and any investment return those contributions earned in the following cases: if you are a non-vested member; or if you are a vested Tier I or II member; or if you are a vested Tier III or IV member who has between five and ten years of membership service. In addition, you may withdraw any supplemental contributions that the Department of Education made to your account because you reached the maximum of your salary schedule. No partial withdrawals are allowed. To withdraw your funds, you must file an "Application for Withdrawal of QPP Accumulations" (code RW41). You may obtain this form by accessing the "Publications/Forms" section of our Web site or by calling TRS at 1 (888) 8-NYC-TRS and selecting Option 3 on the TRS Service Line's main menu.

If I withdraw my QPP funds after resignation or termination, what are the implications for my TRS membership?

Once you withdraw your funds from TRS, your current membership will cease. If, at a later date, you are re-appointed to a TRS-eligible position, you would be treated as a new member and placed in the tier for new members.

If I withdraw my QPP funds, what would be the tax consequences?

The taxable portion of any withdrawn QPP funds are taxable upon receipt and would be reported to the IRS on a 1099-R Form. The IRS requires that TRS withhold 20% of any taxable amount you withdraw unless you instruct TRS to directly roll over the amount into an IRA or Section 401 Plan. An additional IRS-imposed 10% tax would apply unless the withdrawal is made: a) in conjunction with your separation from service in or after the year in which you reach age 55; or b) after you reach age 59-1/2; or c) to pay federally deductible medical expenses; or d) in conjunction with your disability retirement.

Can TRS estimate the amount of the payment if I withdraw my QPP funds?

Yes. If you have officially resigned and have filed the "Application for Withdrawal of QPP Accumulations" (code RW41), you may submit a written request for an estimate of your account balance. However, this request may delay the actual processing of your withdrawal application.

May I pick up my withdrawal check in person?

Yes. On your withdrawal application, you may elect to have TRS hold your check for pickup. At least 60 days after you have filed your application with TRS, you may call TRS at 1 (888) 8-NYC-TRS in order to confirm the status of your withdrawal and the date the check will be available.

May I roll over my withdrawal of QPP funds?

Yes. You may transfer the taxable portion of your withdrawal to another eligible Section 401 Plan or an IRA account. To do so, you must file a "QPP Direct Rollover Election Form" (code RW29) in conjunction with your withdrawal application. Any amount that is distributed through a Direct Rollover is not taxable until it is received as income, and you would not be subject to the 20% withholding tax that applies to direct withdrawals. In addition, you would not have to pay the additional 10% tax that applies to some direct withdrawals. You may obtain this form through the "Publications/Forms" section on our Web site or by calling TRS at 1 (888) 8-NYC-TRS and selecting Option 3 on the TRS Service Line's main menu.

May I leave my QPP funds at TRS after separating from service?

Yes. If you are a vested member, you would be eligible to begin receiving retirement allowance checks at age 55. If you are a non-vested member, your funds would continue to gain investment return for seven school years and, during that time, you may obtain another TRS-eligible position that enables you to maintain your membership. For more information, please see the Separating From Service brochure (code 1.3). You may view publications on our Web site's "Publications/Forms" section or may order publications by calling TRS at 1 (888) 8-NYC-TRS and selecting Option 3 on the TRS Service Line's main menu.

May I transfer my membership to another retirement system after separating from service?

Yes. You may be eligible to transfer your membership to one of the following retirement systems: The New York City Board of Education Retirement System, The New York City Employees Retirement System, The New York State Teachers' Retirement System, or The New York State and Local Employees' Retirement System. You may obtain a "TRS Membership Transfer Form" (code RW39) through the "Publications/Forms" section on our Web site or by calling TRS at 1 (888) 8-NYC-TRS and selecting Option 3 on the TRS Service Line's main menu. Please note that non-vested members must submit this form to TRS within seven school years of their separation from service.