8. I’m leaving the City to work for another municipality or department not covered by CMERS. What are my options?
There are three options available to members leaving CMERS.
- Refund of Contributions for non-vested membersMembers who terminate service (other than by death or disability) may withdraw all their contributions from the date of hire, with interest calculated for the period of membership provided they are not vested in the CMERS plan. The contributions being withdrawn will be credited with an annualized simple interest rate determined by state statute currently set at 5%.
If you do withdraw contributions, you waive all claims and entitlements for all retirement and pension related benefits for the period of membership for which the withdrawal is made.
If you do not chose to roll the amount over, tax-deferred contributions and accumulated interest credited to your account are taxed upon withdrawal. The Internal Revenue Service (IRS) requires CMERS withhold 20% from your refund if you do not roll over the funds to a qualified retirement plan or IRA. In addition, the IRS imposes a special penalty tax on early distributions, such as a lump sum distribution, received before the plan participant reaches age 59ï¿½. This special penalty tax of 10% of the taxable portion of the distribution is applied in addition to the regular income tax. – Delete this section.
- Direct RolloverAll or part of the refund you receive from the CMERS System may be eligible for rollover by you or CMERS to a traditional IRA or an eligible employer plan. An “eligible employer plan” includes a plan qualified under section 401(a) of the Internal Revenue Code (IRC), including a 401(k) plan, profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase plan; a 403(a) annuity plan; a 403(b) tax-sheltered annuity; and an eligible 457(b) plan maintained by a governmental employer (governmental 457 plan). After December 31, 2007, your payment can be rolled over to a Roth IRA subject to the same limits that apply to rollovers from a traditional IRA to a Roth IRA.
You can roll over the distribution by reinvesting it as stated above within 60 days of receiving the distribution. The amount rolled over is not taxed until you take it out of the IRA or employer plan. You have up to 60 days to roll over the eligible portion of your distribution. If you elect not to roll over when the distribution is made and later (within the 60 days allotted) decide to roll over, you must find other money to replace the 20% that was withheld.
Such rollovers must be approved in advance by CMERS. Please contact the office of CMERS for further information.
- Leave Dollars in CMERS (for vested individuals only)A vested individual, as defined, has at least five years of actual (not just vested) service upon termination of membership before age 55. A terminated vested individual is entitled to a service retirement commencing on the member’s retirement age.