There is no benefit formula used to calculate the value of your defined contributions. The value of your account will be based entirely on the amount you contribute and the performance of the investments. As in any investment, there is an element of risk.
The WSIB values the TAP once each month. Since the WSIB Investment Program is composed of a variety of investment vehicles, its value is measured by the composite worth of the fund’s entire portfolio as determined by the current market value of each investment. Your contributions are converted to shares in the fund. The cost of a share is based on the composite value of the fund at the time the share is purchased. Share values increase or decrease at the same rate as the TAP.
Within the Self-Directed Investment Program, member portfolios are valued daily. There are a variety of investments available through the Self-Directed Investment Program. Each investment is valued separately based on its current selling price in the market.
Your employer transmits your contributions and member data to DRS at a minimum on a monthly basis. Under state law, employers are required to provide DRS with member contributions and data by the 15th of the month following the month in which the contributions were deducted from your paycheck.
Both investment programs incorporate a Short-Term Investment Fund (STIF) where contributions are placed and begin earning interest. When individual member contributions (reported by an employer) are reconciled with the cash DRS receives from the employer, the process of moving your contributions into your investment program begins.
Depending on your employer’s reporting schedule and your choice of investment program, there will be some variation in the time it takes for contributions to move between the STIF and your investment allocation. For more information about how your investments are processed, refer to your Plan 3 Investment Guide.
WSIB Investment Program account statements are issued 45 days after the end of the quarter. Self-Directed Investment Program account statements are issued 10 business days after the end of the quarter.
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, the Self-Directed Investment Program offers a lifetime annuity payment option.
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.