Leaving your current LEOFF-covered position before you retire may have an impact on your benefits. The nature of the impact depends on your age, final average salary and service credit when you leave LEOFF employment, and whether you withdraw your contributions from the plan. Contact DRS for more information before you leave your LEOFF position.
If your LEOFF-covered employment ends, you may withdraw your accumulated contributions. You cannot withdraw contributions made by the state or your employer. This is the only circumstance in which a refund is permitted. Withdrawal of your contributions cancels all rights and benefits you have accrued in LEOFF, except as noted in “Restoring LEOFF service credit.” You can learn more by reading Withdrawal of Retirement Contributions, a DRS information and application packet that is available from the DRS Web site or through your employer.
If you leave your contributions with LEOFF, your funds will continue to accrue interest and your service credit will be preserved for you in the event you return to LEOFF service.
If you leave a LEOFF-covered position and leave your contributions in the plan, please keep DRS informed of changes in your name, address and beneficiary.
In general, federal law requires DRS to withhold 20 percent of the tax-deferred portion of lump sum payments for federal income tax unless the funds are transferred directly to another eligible retirement plan. Federal law may also require an additional 10 percent tax be withheld as an early withdrawal penalty if you are under age 50. You can find more about withholding penalties by reading Withdrawal of Retirement Contributions, a DRS information and application packet.
DRS is required to report all lump-sum payments to the Internal Revenue Service (IRS). It is your responsibility to report the withdrawal on your tax return. For more information on this subject, contact the IRS or your tax advisor.
If you are reemployed in a LEOFF-covered position and you meet the minimum medical and health standards (if required), you may restore your service credit in Plan 1. To do so, you must repay the amount withdrawn within five years of returning to service, or before you retire, whichever comes first. Contact DRS to arrange a payment schedule. Payment must be completed by the deadline, or your service cannot be restored. No partial restorations can be allowed. You can learn more about restoration of service credit by reading the DRS publication, Plan 1 Recovery of Withdrawn or Optional Service Credit. If you miss the deadline, see “Purchasing service credit” below.
If you are denied permission to return to Plan 1 membership because of failure to meet minimum medical and health standards, DRS will provide information about restoring your contributions for service credit in Plan 2.
It is still possible to purchase withdrawn or optional service credit after the statutory deadline for restoration has passed. The cost for purchasing service credit after the deadline date is considerably more expensive. You can learn more about purchase of service credit by reading the DRS publication, Plan 1 Recovery of Withdrawn or Optional Service Credit.
If your next position is LEOFF-covered, your membership and service credit will normally continue.