Your defined contribution investments are part of your retirement income. However, if you choose, you can elect to withdraw the funds in your SERS Plan 3 defined contribution account any time you separate from all SERS-covered employment. You may take payment under a variety of payment plans, including installments, lump sum or rollover, which you design to fit your specific retirement goals. In addition, a lifetime annuity payment option is also offered.
To learn more about your withdrawal options, obtain the Plan 3 Request for Payment of Defined Contribution Funds packet from the record-keeper. The record-keeper offers individualized consultations on payment plans via a toll-free customer service phone line.
The withdrawal process, from the time you leave employment and submit your withdrawal request until you receive payment or the money is rolled over to a qualified account, usually requires 30 to 90 days. The length of time depends on your employer’s reporting cycle, how long you have been separated from employment, the time of month you submit the request, and the investment program from which you are withdrawing.
You will owe income tax on your tax-deferred contributions and investment earnings when you withdraw funds from your defined contribution account.
The IRS requires that 20 percent of any lump sum or partial payment withdrawal of tax-deferred funds be withheld. If you are under age 59½ when you take payment, an additional 10 percent tax for early withdrawal may be assessed by the IRS when you file your annual tax return. All withdrawals paid to you are reported to the IRS as earnings in the year the withdrawals are paid.
If you wish to avoid the withholding tax and 10 percent additional tax, you may roll the funds directly into a tax-deferred retirement account, or a qualified employer-sponsored retirement plan.
For more information about withdrawing your defined contribution money and the associated tax requirements, obtain a copy of Publication 575, Pension and Annuity Income, from the IRS.
If the WSIB’s earnings on SERS combined Plan 2 and Plan 3 fund assets average more than 10 percent annually over a four-year period, half of the amount over 10 percent will be passed on to Plan 3 members’ defined contribution accounts based on each member’s service credit. Gain sharing payments are made in January of even-numbered years and are deposited in members’ defined contribution accounts.
To be eligible for a gain sharing payment, you must meet one of the following criteria: