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Refunds of Contributions

Table of Contents

• Is a refund right for you?

• Taxes and penalties if you take a refund

Is a refund right for you?

If you are vested (through IMRF or reciprocal service), having money in IMRF is a valuable asset for your future retirement.

The decision to take a refund should not be made lightly. By accepting a refund of your contributions you forfeit all rights to any future IMRF benefits, although you may repay your refund at a later date if you return to work with an IMRF or reciprocal employer for two years.

If you have at least 12 months in IMRF and have service credit in another Illinois Reciprocal System, this credit may be combined to meet the vesting requirements for both systems.

If you have less than 12 months of service in IMRF and do not plan to return to an IMRF employer, we recommend that you consider a refund or rollover of your IMRF funds.

The one exception to this is if you participated in IMRF as a Teacher Aide and earned less than 12 months of IMRF service credit, and you transferred to a position covered by the Teachers’ Retirement System, you may apply your IMRF service toward a reciprocal pension even though it does not meet the 12-month requirement.

Be aware that you cannot take a refund of your contributions if you are still working for the same IMRF employer, even if you no longer participate in IMRF.

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Taxes and Penalties if you take a refund

If you don’t qualify for an IMRF pension when you reach retirement age, we encourage you to consider a refund or rollover of your funds to a traditional IRA or another retirement plan that will accept IMRF funds.

Before dollar signs start flashing before your eyes, be aware of the following facts:

Why wouldn't you want to take a refund?

When you take the refund rather than roll your contributions into another plan, IMRF is required by federal law to withhold 20% of the taxable portion of your separation refund for federal income tax. Depending on your years of service and age, you may also be liable for a tax penalty of 10% over your tax rate.

Is there any time IMRF would not withhold the 20% for federal taxes?

If any of your IMRF contributions are “previously taxed,” IMRF will not withhold the 20% for federal taxes when taken as a refund. Previously taxed contributions are noted as such on your Member Statement of Account.

What is a rollover?

A rollover means that you transfer or reinvest your IMRF funds (or other qualified retirement money) into another vehicle for retirement savings without incurring tax penalties. The plan you “roll” the money into can be a traditional IRA, a 401(k), 457, 403(b) plan, or other qualified retirement plan that will accept the rollover.

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