Leaving your current TRS position before you retire will have an impact on your benefits. The nature of the impact depends on your new employer and whether you withdraw your contributions from TRS.
If you leave TRS-covered employment, you may withdraw your contributions plus interest. A withdrawal before retirement cancels all rights to future benefits in TRS. You cannot borrow or withdraw contributions made by your employer.
Withdrawal forms are included in the DRS publication Withdrawal of Retirement Contributions which is available through your employer or DRS. Processing a withdrawal normally requires 60 to 90 days.
If you resume employment with a TRS-covered employer before payment is made, you are not eligible to receive a withdrawal. If you receive a withdrawal under these circumstances, you must return it to DRS immediately.
Under federal law, any lump-sum withdrawal of tax-deferred retirement funds is subject to a withholding tax of 20 percent. The 20 percent tax can be avoided only by a “direct rollover” of funds to a qualified tax-deferred retirement account. You can find more about this requirement by reading Withdrawal of Retirement Contributions, a publication which is available through your employer or DRS.
Federal tax law may require that you pay a 10 percent penalty at the time you file your income tax. This penalty is in addition to regular income tax on the tax-deferred and interest portions of contributions that you withdraw before you reach age 59 1/2. You may be able to avoid this tax penalty by rolling these funds into a qualified tax-deferred retirement account.
DRS is required to report all withdrawals to the Internal Revenue Service (IRS). It is your responsibility to account for the withdrawal on your tax return. For more information on the tax consequences of withdrawing your contributions, contact the IRS or your tax advisor.
You have the option of leaving your contributions in the plan until April 1 following the calendar year in which you reach age 70 1/2 or retire, whichever is later. Your contributions are earning 5.5 percent interest annually, compounded quarterly. If you leave your contributions in the plan and later return to a TRS-covered position, you retain service credit for the earlier service.
If you leave a TRS-covered position and leave your contributions in the plan, keep TRS informed of your current name, address and beneficiary.
If your next job is in a covered position with another public school in Washington state, your membership and service credit will continue.
If you do not withdraw your contributions and your next job is with a state agency or a public school in a position normally covered by the Washington state Public Employees’ Retirement System (PERS), you will remain in TRS.
If you withdraw your TRS Plan 1 contributions and then go to work in a state agency, you will be reported as a PERS member. As a dual member, you will be entitled to restore your withdrawn TRS contributions within two years of going to work with the agency. (See “Restorations for Dual members”.) Upon restoration of your withdrawn contributions, plus interest, you will return to TRS Plan 1 membership and earn TRS Plan 1 service credit from that time forward. Time spent as a PERS member will remain as PERS service credit.