Refunds
of Contributions
Table
of Contents
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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Qualifying
for a refund
To
qualify for a refund you must no longer be working for an IMRF employer
and one of the following cases will apply:
- Less
than age 55 - All of your IMRF contributions will be returned to
you upon request. You can complete IMRF
Form 5.10 to request a refund. However, you will be forfeiting
a right to a future pension. Please
note, Form
5.10 must be notarized. If you submit the form without it being
notarized, it will be returned to you and your refund will not
be processed.
- Age
55 or older - If your IMRF service qualifies you for a monthly pension
of $30 or more, you cannot withdraw your contributions, but instead
will receive them as a part of your monthly pension.
Exception to age 55 or older refund rule: You can receive
a refund only if you will roll it over into another defined benefit
retirement plan to purchase qualifying service credit.
If
you take a refund of your contributions, you may redeposit those withdrawn
contributions and reinstate your years of service credit. To do so,
you must again participate for two years in IMRF or another Illinois
public pension system under the Reciprocal
Act. You may redeposit the withdrawn contributions, plus interest,
either in a lump sum or installments.
Note
that you must terminate employment with your IMRF employer before you
can take a refund. You cannot be working for the same employer that
you earned the credit with, even if you are no longer working in
an IMRF qualified position. For example, if you contributed to IMRF
as a teacher's aide (in a non-certified position) and then went to work
at the same school as a teacher covered under TRS, you cannot take a
refund of your IMRF contributions.
If
you are vested in IMRF, there are
other circumstances under which part of your contributions may be refunded
to you upon retirement. Read more about Surviving
Spouse contribution refunds, SLEP
refunds, and ECO refunds.
Taxes
and Penalties if you take a refund
If
you dont 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.
Can
you take your IMRF contributions and continue saving for retirement on
a tax-deferred basis?
To
continue deferring federal income taxes on your IMRF contributions until
retirement, consider the options made possible by the Economic
Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). When
EGTRRA became law in 2001, it increased the portability of assets from
defined benefit plans such as IMRF. Note: EGTRRA provides many other
retirement saving incentives not mentioned in this article.
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