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Indiana Public Retirement System

Indiana Public Retirement System (INPRS) > My Fund > Public Employees > PERF Hybrid Plan Member Handbook: Receiving Benefits Before Retiring PERF Hybrid Plan Member Handbook: Receiving Benefits Before Retiring

Leaving PERF-covered employment requires you to make important decisions regarding your retirement savings. This section explains the issues you will need to consider if you leave a covered position and separate from service.

Withdrawing Your Annuity Savings Account (ASA)

You may withdraw the balance of your ASA (in the form of a distribution or rollover to another qualified retirement plan) if you are no longer in a PERF-covered position.

These withdrawal amounts consist of:

  • The three percent (3%) mandatory contributions;
  • Any voluntary contributions (if applicable); and
  • All interest and earnings credited to your account.

If you continue uninterrupted employment in any capacity (full-time or part-time) in any agency or department of your current employer – regardless of whether your new position is covered under PERF or not – you will not be considered separated from service. If you are re-employed in a PERF-covered position within thirty (30) days from the date of termination, you are not eligible for a distribution.

If you are vested and have separated employment in a covered position for at least 30 days, you may withdraw your ASA and retain your pension benefit. If you are eligible for a reduced pension benefit, and have separated from employment, you may withdraw your ASA without forfeiting your pension benefit. If you are eligible for a full retirement, you may not withdraw the ASA component without fully retiring.

Payment Options

When you apply for an ASA distribution, you must choose how to receive the payment. You must select one payment option for the taxable portion and one payment for the non-taxable portion.

Members who elect to withdraw their ASAs at retirement will remain invested according to their pre-retirement investment allocations until their ASA is paid out at the time PERF processes their retirement. This means that allocations in the alternative accounts may gain or lose money while your retirement application is being processed.  To avoid risk of loss, members may reallocate their ASA investments to the Guaranteed Account.

Members who elect to annuitize their ASAs at retirement will have the balance of their ASA put into a fixed value account set at the same rate as the Guaranteed Fund. This happens not more than 15 days prior to the member’s retirement date or processing of the member’s retirement application.

Members who elect to defer their ASA at retirement will have the balance of their ASA invested according to their pre-retirement investment allocation.

The tax status of mandatory ASA contributions depends on whether or not taxes were withheld on them before the contributions were made to PERF. The employer-paid portions of mandatory contributions are considered to be pre-tax contributions and are taxable. Portions deducted from a member’s wages after taxes are deducted and considered to be post-tax contributions and are not taxable. Please see Pre-Tax Voluntary Contributions and Taxation on the ASA for additional information.

Taxable Portion - Direct Rollover
You may elect to have all or part of the taxable portion of your ASA paid in the form of a direct rollover into an eligible 401(a), 403(b) or governmental 457(b) plan, or Traditional or Roth IRA, which has provisions allowing it to accept the rollover on your behalf. Except in the case of a Roth IRA, this option defers any taxes you owe on your ASA balance.

If you choose to roll over only part of the taxable amount, the portion not rolled over is paid directly to you (less the mandatory twenty percent [20%] withholding for federal income tax).

If you choose to take a rollover distribution and do not complete the rollover by the 60th day following the day on which you receive the distribution, your distribution may be subject to taxes and/or penalties unless you qualify for a waiver. Please consult your tax professional for waiver qualifications.

Taxable Portion – Paid Directly to the Member
You may elect to have the total amount of the taxable portion of your ASA (less the mandatory twenty percent [20%] withholding for federal income tax) paid directly to you.

Non-Taxable Portion – Direct Rollover
You may elect to have all or part of the non-taxable portion of your ASA paid in the form of a direct rollover into an eligible qualified plan, 403(b) plan, or Traditional or Roth IRA, which has provisions allowing it to accept the rollover on your behalf. If you choose to roll over only part of the non-taxable amount, the portion not rolled over is paid directly to you.

Non-Taxable Portion – Paid Directly to the Member
You may elect to have the total amount of the non-taxable portion of your ASA paid directly to you.

You will receive a 1099-R by January 31 of the year after you receive your distribution. By law, this is the latest date 1099-Rs can be mailed.

PERF will withhold twenty percent (20%) from your distribution of the pre-tax portion paid to you or to your surviving spouse whether or not the IRS imposes a ten percent (10%) penalty. Adjustments may be made for payments made to survivors under special circumstances.

Tax Penalty – Early Withdrawal of ASA

You may be subject to an additional 10 percent (10%) federal tax penalty on your ASA if you have not reached the age of 59 1/2 at the time of your distribution.

Staying Invested

When you leave covered employment, you may leave your ASA invested with PERF. You may continue to invest in any of the eight available options and will continue to receive an online quarterly statement.

However, if you are not vested, investments in the Guaranteed Fund or any of the other seven self-directed investment funds will only be credited with interest, gains and losses for a period of 10 years, after which, no further interest, gains or losses will be credited. An exception to this 10-year rule exists when you leave PERF-covered employment but remain with the same employer in a full-time position. In this case, interest, gains and losses will be credited on funds for up to 45 years.

Your ASA balance is available for distribution once you have a bonafide separation from service with your employer. Your distribution options include payment directly to you, direct rollover, or a partial rollover with the balance paid to you. If your balance is less than $1,000, state law allows PERF to automatically distribute the ASA balance to you if it is not requested.

Death of a Member

When a member dies, PERF must be notified in order to make payments to the appropriate beneficiaries in a timely manner. PERF needs a copy of the death certificate in order to process any distributions of ASA balances or survivor benefits that might be available. Employers may inform PERF of a member’s death; however, the death certificate is still required. Employers do not always provide member death notification.

The ASA will be distributed to the beneficiary or beneficiaries on file. The designated beneficiary’s right to a benefit vests upon the member’s death. A change of beneficiary designation must be on file with PERF before death. A change received after a member’s death is not valid.

If a member designates more than one primary beneficiary, and a primary beneficiary predeceases the member, and the member does not complete a new beneficiary designation form, the remaining primary beneficiaries will receive a pro rata share of the deceased primary beneficiary’s portion based upon the remaining primary beneficiaries’ allocated percentages.

John lists three beneficiaries and the percentages he wants them to receive:
Ann – 60 percent; Bob – 30 percent; and Carl – 10 percent

Ann dies before John. John forgets to fill out a new beneficiary form and dies with $10,000 in his ASA account. Because Ann is deceased, Bob and Carl will now split the $10,000 only two ways.

How John chose to divide a deceased member’s portion – either prorated or equally – will determine surviving beneficiary amounts for Bob and Carl.

If John chose prorated:
Bob’s original percentage was 30 percent. Carl’s was 10 percent. That is a 3 to 1 ratio.
Bob will receive three times the amount or 75 percent ($7,500).
Carl will receive 25 percent ($2,500).

If John chose equally:
Bob will get his 30 percent ($3,000) plus half of Ann’s ($3,000) or $6,000.
Carl will get his 10 percent ($1,000) plus the other half of Ann’s ($3,000) or $4,000.

If you call with information about a member’s death, please leave your name, relationship to the member, and telephone number, as we may need to contact you for further information. A death can also be reported by simply sending the death certificate to PERF by mail or fax.

Survivor Benefits Before Retirement

A PERF survivor benefit was created by the Indiana Legislature for the benefit of survivors of PERF members. If you die while in service, your surviving spouse or surviving dependent(s) may be entitled to survivor benefits if:

  • you have been married for at least two years, and
  • you have at least 10 or more years of creditable service as a member of the General Assembly, or if
  • you have at least 10 years of service in any other position, but not more than 14 years of service, and you are at least age 65, or if
  • you have at least 15 years of service in any other position and you are less than age 65.

If you would have been eligible to receive retirement or disability benefits but died while out of service and before applying for them, your surviving spouse would be entitled to survivor benefits. Survivor benefits are reduced by any disability benefits that may have been paid to you.

If there is no eligible surviving spouse, your survivor benefit is divided between all surviving dependents who are younger than eighteen (18) (or older if the dependent[s] is permanently disabled).

If you have neither an eligible surviving spouse nor surviving dependents, then no survivor benefit will be paid.

This benefit is separate and distinct from any benefit created by your ASA.

Failure to inform PERF of beneficiary changes could result in payment being made to a previously named beneficiary who is no longer your choice to receive your ASA balance upon your death. The Application for Change of Beneficiary is available here. For beneficiary changes, please complete the form and mail or fax it to PERF, or make the change via PERF Online.

Disability Benefits

Disability Retirement

If you become disabled, PERF will provide disability benefits if you:

  • Have at least five (5) or more years of creditable service in a PERF-covered position before the termination of salary, employer provided income protection benefits, Family and Medical Leave Act (FMLA) leave, or exhaustion of all worker’s compensation benefits. Disability must occur while employed in a PERF-covered position, while receiving employer provided income protection benefits, leave under the FMLA, or workers’ compensation benefits; and
  • Are determined by the Social Security Administration to be disabled, and are receiving salary* or employer-provided income protection benefits, or are on leave under the FMLA, or off on workers’ compensation, as of the onset date established by the Social Security Administration (SSA).
  • Timing of the disability onset date as established by SSA before termination of the employer/employee relationship is critical. Please contact PERF if you have any questions about establishing eligibility for disability benefits.

*Receiving a salary includes the last check date for a member. It does not include any checks received later than 30 days from the last day the member was paid. This includes being paid for physical work, sick time, used compensatory time, or while on other leave or vacation.

Notice: PERF CANNOT process your disability application without a copy of your Social Security award letter with the onset date.

To become eligible for a disability retirement, a member must have at least five (5) years of creditable service in a position covered by PERF and/or the Teachers’ Retirement Fund (TRF). The member’s disability must occur while employed in a PERF-covered position, while the member is on Family Medical Leave Act (FMLA) leave, while receiving employer-sponsored disability insurance compensation, or while you were off on workers’ compensation. Additionally, the disability must qualify for Social Security disability.

You must provide proof of Social Security disability qualification to PERF. If you have applied for but not received an award letter from Social Security, you may still complete an Application for Retirement Benefits and attach a copy of the application sent to the Social Security Administration.

Notice: In order to qualify for a disability retirement benefit from PERF, the onset date of the Social Security disability must be effective back to the time you were working in a PERF-covered position, while you were on Family Medical Leave Act (FMLA) leave, while receiving employer sponsored disability insurance compensation, or while you were off on workers’ compensation.

At least once a year until the member reaches age 65, PERF is required to confirm that the member continues to remain eligible for Social Security disability benefits. Failure to confirm continued Social Security disability will result in suspension of benefits. If you are no longer eligible for Social Security disability benefits, you are no longer eligible for PERF benefits. Any PERF benefits paid after you are no longer eligible must be returned by law.

Disability Retirement benefit options and calculations for the monthly pension benefit plan, the ASA, and the RSA are the same as those for any other retiree except that 1) the Social Security Integration option is not available, 2) generally, only the creditable service worked up to the date of the disability applies, 3) there is no early retirement reduction, and 4) the monthly disability benefit payment may not be less than $180 per month or the actuarial equivalent based on the payment option selected.

Members receiving disability benefits who become age- and service-eligible will be switched to a regular retirement benefit. This will not adversely affect your benefit. Annual disability confirmation will no longer be required.

Direct Deposit
Direct deposit is the preferred method to distribute benefit payments. On the same day each month, the amount of your payment will be deposited directly into the account you specify. You will receive an annual notice of deposits. Your money cannot be lost or stolen, and there are no delays due to mishandled mail or incorrect addresses. Please contact PERF at (888) 526-1687 to request a form be mailed to you, or download it here.

Section Three: Retiring from PERF