If you terminate employment in a job covered by a participating employer prior to attaining retirement eligibility, you have options you should be aware of.
If you are vested in the system (currently 5 or more years of contributing service), you may begin collecting your pension benefit when you meet your retirement eligibility criteria — as long as you do not withdraw your contributions. This is called Deferred Retirement. You may also choose not to receive a future retirement benefit from ERSRI and withdraw your member contributions.
In some cases, your eligibility date may change if you leave employment prior to reaching your full retirement date. However, your accrued benefit will be the same as it was the day you terminated employment. Depending on several factors, including the amount of service you earned before terminating your employment, you may be eligible to initiate your retirement benefit prior to reaching your full eligibility date by electing to retire under a Transition Rule. However, exercising early retirement will result in your receiving a reduced benefit.
It is important to know that after leaving active employment, ERSRI will not automatically begin sending your pension benefit to you once you have reached eligibility. It is your responsibility to notify ERSRI of your decision to retire and to submit a service retirement application approximately three to six months before you are eligible to begin collecting your benefit.
If you do not apply for your pension benefit when you first become eligible, you will not receive retroactive benefits to the date when you were initially eligible. Deferred retirement benefits are payable beginning on your eligibility date or on the first of the month in which your completed application is received by ERSRI, whichever is later.
To qualify for a deferred retirement benefit, you must leave your money on deposit with ERSRI when you terminate employment.
Withdrawing Your Contributions
Upon termination of employment, if you are not vested in the system or if you are vested but elect not to receive a deferred retirement benefit from ERSRI, you can elect to take a refund of your pension contributions without interest. You can roll this money over into a qualified retirement account or take the refund as a direct cash payment.
If taken in the form of a direct cash payment to you (in lieu of a roll over), a refund of your contributions is subject to state and federal income taxes, and ERSRI must withhold 20% in federal tax from the taxable portion of your refund. In addition, if you receive a lump sum distribution of your pre-tax member contribution account from the System before the minimum age for federal and state requirements, and you do not roll it over into another qualified plan or an Individual Retirement Account (IRA), you may also have to pay a tax penalty for early withdrawal.
When considering a refund, ERSRI strongly encourages you to seek advice from a qualified tax professional. ERSRI cannot provide you with such advice.
To initiate a refund of your ERSRI contributions, use the link below to download and submit an Application for Termination Packet form or call the Member Service Center at (401) 462-7600 and request a Termination Packet.