Guide to the Retirement
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• Important Note
• Choice A: Leave your retirement contributions and interest in the Plan for now and withdraw them later.
• Choice B: Leave your retirement contributions and interest in the Plan and choose to receive a vested right retirement annuity if you are eligible.
• Choice C: Withdraw your accumulated contributions and interest in a lump sum check payable to yourself.
• 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.
• Additional Important Information About Withdrawals
• Important Tax Information Regarding Your Withdrawal
• Vested Right Retirement Allowance Estimate

Important Note:

   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 are still an active employee of the Department of Water and Power (i.e., you have not resigned or been laid off). If you are on disability and choose to resign in order to withdraw, you will no longer receive disability.
   
• You have a divorce pending. The Water and Power Employees' Retirement Plan (The Plan) will need a copy of your final decree of divorce explaining the division of money between you and your ex-spouse.

You DO still have several choices of what to do with your retirement contributions if you leave the Department of Water and Power:

Choice A: Leave your retirement contributions and interest in the Plan for now and withdraw them later.

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.

Choice B: Leave your retirement contributions and interest in the Plan and choose to receive a vested right retirement annuity if you are eligible.

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?

• You will not receive any health benefit subsidy, nor will you receive cost of living adjustments.
   
• You may be eligible for "death benefits," so that if you retire and then die you beneficiary may receive fourteen times your monthly allowance, up to $20,000, if you had completed more than five years of service prior to resigning.
   
• Depending on the retirement option you choose, you may receive a reduced retirement allowance in order to provide additional benefits to your beneficiary. Then, if you were to die after you retired on a vested right allowance, your beneficiary would receive 50 percent of 100 percent of that reduced amount. 

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:

• Have been a Plan member for 12 or more consecutive months (except if you are discharged for cause),
  or
• Have been employed for 10 or more years at the Department regardless of the reason you terminated.

When may I receive my vested right retirement annuity?

• You may receive a vested right annuity at age 60
  or
• You may receive a vested right annuity as early as age 55, if for 10 years of the 12 years immediately prior to leaving the Department, you were continuously employed by the Department.

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.

Choice C: Withdraw your accumulated contributions and interest in a lump sum check payable to yourself.

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?

Additional Important Information About Withdrawals

• The entire process for any withdrawal usually takes six to eight weeks once all the paperwork has been submitted.
• If you choose to have checks mailed, be aware that we send checks over $1,000 by certified mail.
• If you wish to have someone pick up your check for you, you must designate that person in writing.
• Once you sign the withdrawal request and have it notarized, interest will stop being credited to your retirement contribution accounts.
• You must complete all forms before we can send your request to the Retirement Board for approval.
• We will send you Tax Form 1099 in January of the year following your withdrawal.
• You will have taxable income reported for all interest earned on your account and all contributions made by you that are taxable

   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.

Important Tax Information Regarding Your Withdrawal

   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:

• If you roll over your distribution from the Plan directly to an IRA or another employer's qualified plan it will not be subject to the 20% tax withholding mentioned under Choice C. The withdrawal check must be made payable to the IRA or the new qualified plan.
  
• You may roll over the distribution from the Plan first to an IRA, and later roll over the IRA to your new employer's qualified plan. The 20% withholding tax does not apply to roll over distributions from an IRA.
  
• You may not roll over any "after-tax" portion of your distribution from the Plan (e.g. contributions made before July 1, 1989). The withdrawal check for this portion will be made payable to you.

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:

• You will have to pay into the IRA or qualified plan, an additional $10,000 to make up the difference to avoid paying taxes on that amount,
  or
• You will be taxed on $10,000. However, you may credit the $10,000 the Plan withheld against any tax due when you file your Federal income tax return for the year in which you received the distribution. Therefore you may get a refund of a portion of the $10,000, depending on the tax you owe on other income. Also, if you are under age 59-1/2 at the time of distribution, you may have to pay a 10% federal penalty tax and applicable state tax penalties on the $10,000.

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:

• The Plan is required by Federal tax law to withhold 20% of the taxable portion of your withdrawal and send it to the Internal Revenue Service. You will be taxed on the entire taxable portion. However, you may credit the amount the Plan withheld against any tax due when you file your Federal income tax return for the year in which you received the distribution. Therefore you MAY get a refund of a portion of the amount we withheld, depending on the tax you owe on other income.
  
• If you are under age 59-1/2 at the time of distribution, you may have to pay a 10% Federal penalty tax and applicable state tax penalties on the entire taxable portion of your withdrawal. You will not be taxed on any "after-tax" portion of your distribution (e.g. contributions made before July 1, 1989).
  
• If you are 59-1/2 or older at the time distribution, you will not have to pay the Federal penalty tax. You will not be taxed on any "after-tax" portion of your distribution (e.g. contributions made before July 1, 1989).
  
• If you do not roll over the funds you withdrew from the Plan, and you meet certain requirements, you may qualify to treat part of the taxable portion as long-term capital gain, and part under multi-year income averaging provisions.

Any questions?

   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.

Vested Right Retirement Allowance Estimate

If you are interested in a calculation of your vested right allowance, please call or write to us with the following information:

1. Employee Name
2. Employee Number
3. Birth Date
4. Daytime Phone Number

Someone from the membership section will contact you.

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