While your defined contribution investments are intended to be part of your retirement income, any time you separate from all TRS-covered employment you may elect to withdraw the funds in your defined contribution account. 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, both the WSIB and the Self-Directed Investment Programs offer lifetime annuity payment options.
To learn more about your withdrawal options, obtain the Plan 3 Request for Payment of Defined Contribution Funds packet from the ICMA-RC. ICMA-RC offers individualized consultations on payment plans via a toll-free customer service phone line. See ICMA contact information.
The withdrawal process usually requires 30 to 90 days from the time you leave employment and submit your withdrawal request. 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.
If you choose a cash distribution, you will owe income tax on your tax-deferred contributions and investment earnings.
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 calendar year the withdrawals are paid.
If you wish to postpone the withholding tax and avoid the 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.