|Guide to the Withdrawal Process|
The Water and Power Employees' Retirement disability and Death Benefit Insurance Plan (The Plan) is required to provide you with this notice under Section 402(F) of the Internal Revenue Code. The Internal Revenue Code provides several complex rules regarding taxation of retirement contributions that you withdraw from the Plan. This notice merely summarizes these rules and is not intended as tax advice. You should consult a tax advisor before deciding whether or not to withdraw. The Plan cannot provide tax advice.
This Page Describes
There is no provision in the Retirement Plan to provide for borrowing any of your retirement contributions, withdrawing a portion of your contributions, or using this money as collateral for a loan.
In addition, you MAY NOT withdraw your retirement contribution if:
You DO still have several choices of what to do with your retirement contributions if you leave the Department of Water and Power:
Do I have to make this decision now?
NO, You do not have to make a decision immediately. If you choose to leave your money in the Plan, you may still decide at a later time to withdraw it. Be sure to read Choice C and Choice D before making that decision.
What will happen to my money if I leave my retirement contributions and interest in the Plan?
Both your account and the Department matching account will continue to receive interest. Currently interest is earned at 8 percent.
Even if I resign or am laid off, may I still receive some kind of pension from the Department?
This may be possible if you are eligible and you do not withdraw your retirement contributions and interest. See the sections on vested right retirements under Choice B.
How will I know how much money I have in this account after I leave?
Each year the Plan will send you a statement of your account. It is very important to keep us updated on your current address.
Who will receive my money when I die?
The person you designated as your beneficiary will receive your retirement contributions and interest. Be sure to keep your beneficiary up-to-date so that we will distribute your money according to your wishes.
What is a vested right retirement?
A vested right retirement is a monthly annuity you may receive at age 60 (possibly age 55, if you meet the requirements) for the rest of your life.
What are the conditions of a vested right retirement?
Do I qualify for a vested right retirement?
If you do not withdraw your retirement contributions, you may qualify for a vested right retirement allowance even though you are no longer a Department employee. You may leave your retirement contributions in the Plan and qualify for a vested right retirement allowance if you:
When may I receive my vested right retirement annuity?
How do you calculate a vested right retirement?
The calculation and related assumptions used are complex, but basically the money in your account and the Department matching account at the time you retire are added together and divided by a factor for your age at retirement. The factor is taken from an actuarial table based on mortality rates. Both your account and the Department matching account will have received interest compounded annually.
If you need an estimate of your vested right annuity, you may contact us to request a Vested Right Retirement Allowance Estimate at the end of this guide.
What are some examples of the vested right annuity estimates?
If I withdraw my contributions and interest now, may I put the money back in later to receive a vested right retirement?
No. You may not put money into the Plan once you are no longer an active member of the Plan.
What if I currently have a contract to buy back City service time, Department service time or my first six months of qualifying service?
If you complete the contract or pay off the contract before you leave, the amount will be matched by the Department at 110 percent. If you have not completed the contract or pay off the contract before you leave, the amount will not be matched by the Department; therefore only your contributions and interest will be included in the vested right retirement calculation.
What are the tax consequences if I withdraw my accumulated contributions and interest in a lump sum check payable to myself?
Please read Important Tax Information Regarding Your Withdrawal near the end of this guide.
Will I receive all the money in my retirement account?
No. In addition to the other tax consequences, the Plan must withhold 20 percent of the taxable portion for Federal taxes. Also, you will not receive the money in the Department matching account.
When will I receive my check?
After you complete your request to withdraw, we will hold it for a mandatory 30-day waiting period as required by the Federal government. After the waiting period has been completed, your request to withdraw will go to the following Retirement Board meeting and a check will be issued approximately a week later. The entire process usually takes about six to eight weeks.
If I withdraw my retirement money, what will I be giving up?
You will be giving up your right to a vested right retirement and any Death Benefit that would have been payable to your beneficiary.
How do I start the process for my withdrawal?
You must have already resigned or been laid off. You may either pick up the forms in the Retirement Plan Office, Room 357 or call us for the forms. One of the forms must be notarized. We have notaries available to help you, or you can have that form notarized elsewhere.
Choice D: Withdraw the already taxed portion of your accumulated contributions and interest in a check payable to yourself, and do a direct roll over of the taxable portion of your accumulated contributions and interest to an individual retirement account (IRA) or another employer's qualified Defined Contribution plan.
What is the taxable portion and what is the already taxed portion of my accumulated contributions and interest?
How do I set up an IRA?
Go to a financial institution for a direct roll over of the taxable portion of your accumulated contributions and interest to an IRA account. Have them fill out the paperwork and have a representative from the institution sign it. sign it yourself to authorize the roll over and to agree to the arrangements you want to make to receive a check for the portion of your contributions that has already been taxed.
How do I plan a roll over to my new employer's Defined Contributions plan?
Go to your new employer's Defined Contribution plan administrator and request a direct roll over of the taxable portion of your accumulated contributions and interest to that account. Have them fill out the paperwork and have a representative from that plan sign it. Sign it yourself to authorize the roll over and to agree to the arrangements you want to make to receive a check for the portion of your contributions that has already been taxed.
Also See Choice C for additional information about withdrawing your funds?
See Choice D regarding the portion of your accumulated contributions and interest that is taxable and the portion on which you have already paid taxes.
If you decide to withdraw, you should consider how you plan to use the money before you select a withdrawal choice.
For use as savings for retirement
If you want to use your withdrawal (which is also known as a "distribution") as savings for retirement, be sure to have your distribution made directly to an Individual Retirement Account (IRS) or to another employer's qualified Defined Contribution plan.
The following describes the resulting tax consequences:
For your personal use, after which you deposit it to an IRA or a qualified plan.
If instead of directly rolling over your distribution, you receive a withdrawal check and then deposit the amount you withdrew in an IRA or another qualified plan within 60 days, you may be taxed on part of the distribution. The following is an example of the tax consequences in this type of situation:
Let's say the taxation portion of your withdrawal is $50,000. The Plan is required by Federal tax law to withhold 20% of that amount ($10,000) and send it to the Internal Revenue Service. You will receive a $40,000 check payable to you, which you use as you choose. Then, within 60 days, you deposit $40,000 to an IRA or qualified plan. The IRS will not consider this to be a complete roll over, and, one of two things will probably occur:
For uses other than retirement
If you do not want to use your withdrawn funds for savings for retirement, you should be aware of the tax consequences of receiving a distribution:
If you have any questions about this law and the effect it has on your withdrawal from the Plan, please call 213-367-1736 or 213-367-1695. For tax information or advice, see your tax consultant, the Internal Revenue Service, or the State Franchise Tax Board. Consult the financial institution of your choice for additional information about roll overs. Once again, the Plan does not and cannot provide tax advice.
If you are interested in a calculation of your vested right allowance, please call or write to us with the following information:
Someone from the membership section will contact you.
|Although this document discusses the Plan in some detail, if there are any conflicts, real or apparent, between this document and the City Charter or the Plan, the terms of the Charter and the Plan will at all times be the final authority. Therefore before relying on provisions described in this document or taking any action which will affect your future welfare, you and your beneficiaries are urged to consult the Retirement Plan Office for the specific terms of the Plan in any situation.|