Terminating PERA-Covered Employment
Upon terminating PERA-covered employment, you may:
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Roll over or refund your PERA Defined Benefit (DB) plan account(s).
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Leave Your DB Plan Account(s) With Colorado PERA for a future rollover/refund or monthly benefit.
Rolling Over or Refunding Your Colorado PERA DB Plan Account(s)
Note: On January 1, 2010, the Denver Public Schools Retirement System (DPSRS) merged with Colorado PERA. As a result, you may have two DB plan accounts with Colorado PERA; one under the PERA benefit structure and one under the Denver Public Schools (DPS) benefit structure. If you choose to roll over or refund your DB plan accounts, you must withdraw both accounts unless you are eligible to retire from one or both benefit structures and choose to take a benefit.
When you roll over or refund your DB plan account(s), you forfeit any future right to a benefit. Your DB plan account(s) will consist of:
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Your tax-deferred (pre-tax) member contributions.
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Tax-paid (after-tax) money which would have been contributed to the PERA benefit structure before July 1, 1984, and before January 1, 1986, to the DPS benefit structure.
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Interest compounded annually (the interest rate is set by the PERA Board and is subject to change annually; currently the interest rate is 3 percent).
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Money you paid to purchase service credit.
Colorado PERA's Customer Service Center can provide you with the tax-deferred and tax-paid amounts in your DB plan account(s).
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If you roll over or refund your PERA benefit structure DB plan account and you have five years of earned service credit:
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You will receive a 50 percent match on contributions and interest if you are not retirement-eligible.
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You will receive a 100 percent match on contributions and interest if you are retirement-eligible.
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If you roll over or refund your PERA benefit structure DB plan account and you do not have five years of earned service credit:
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You will receive a 50 percent match on contributions and interest for contributions made on or before December 31, 2010, if you are not retirement-eligible.
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You will not receive a match on contributions and interest for contributions made on or after January 1, 2011, if you are not retirement-eligible. (SB-1 provides for this change effective January 1, 2011.)
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You will receive a 100 percent match on contributions and interest if you are retirement-eligible.
If you roll over or refund your DPS benefit structure DB plan account:
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You will receive, at time of refund, a 100 percent match equal to your contributions and interest if you are retirement-eligible, are an inactive member who terminated employment on or after January 1, 2001, and you have five years of service credit; otherwise no match is included.
To roll over or refund your DB plan account(s), you must review the Terminating PERA-Covered Employment booklet and complete the Rollover Request—Defined Benefit Plan or Refund Request—Defined Benefit Plan form attached to the back of the booklet. You can print or order the booklet now, or call Colorado PERA at 303-832-9550 or 1-800-759-7372 to request a copy.
Distributions Methods
Distributions may be made as:
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A payment to you.
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A direct rollover to an Individual Retirement Account (IRA) or an eligible employer plan.
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A combination of both. (Partial, early, or hardship refunds are not permitted by law.)
Taxes on Refunds
All contributions made after July 1, 1984, under the PERA benefit structure, and contributions made after January 1, 1986, under the DPS benefit structure, and interest earned on your DB plan account(s) are tax-deferred and subject to federal and state income tax when you receive a distribution of the DB plan account(s). Also, if you are under age 55 when employment is terminated and the DB plan account(s) is withdrawn before age 59½, the tax-deferred portion your DB plan account(s) is subject to a 10 percent IRS early withdrawal tax penalty in addition to the regular income tax.
If you request to have your DB plan account(s) paid to you, you will only receive 80 percent of the tax-deferred amount of your DB plan account(s) because Colorado PERA is required to withhold 20 percent of that amount and send it to the IRS as income tax withholding to be credited against your taxes. The taxable amount of your DB plan account(s) will be taxed in the current year unless you roll it over to a traditional IRA or eligible employer plan. Under limited circumstances, you may be able to use special tax rules that could reduce the tax you owe. However, if you receive the payment before age 59½, you may have to pay an additional 10 percent tax penalty to the IRS.
Federal Tax Withholding if You Have a Foreign Address
Under the United States IRS Code Section 1441, all pension payments or refunds are subject to U.S. tax at a 30 percent rate. This tax is imposed on the gross amount paid and is collected by withholding on that amount.
If your address is outside of the United States, you must complete one of the following forms for federal income tax withholding:
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If you are a U.S. citizen (even though you reside outside of the United States) you must provide to PERA an IRS Form W-9, Request for Taxpayer Identification Number and Certification. The only purpose of this form is to gain your certification that you are a U.S. citizen; PERA is not requesting you to obtain a new Taxpayer Identification Number.
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If you are a foreign person (a nonresident alien), you must provide to PERA an IRS Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding to:
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Establish that you are a foreign person;
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Claim that you are the beneficial owner of the income for which Form W-8BEN is being provided; and
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Claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty (if applicable).
Additional information is available from the United States Internal Revenue Service (1-800-829-1040 or www.irs.gov) in Publication 519 titled, U.S. Tax Guide for Aliens.
Colorado PERA is required by law to withhold 30 percent from any benefit payments you are to receive if Form W-9 or Form W-8BEN is not received. If you should have any questions about your tax status, please contact your tax adviser.
Click on the IRS links below for assistance with completing these forms.
Leave Your DB Plan Account(s) With Colorado PERA
You may want to leave your DB plan account(s) with Colorado PERA, especially if you anticipate returning to Colorado PERA employment or if you are vested (have at least five years of service credit). Your DB plan account(s) will remain tax-deferred, continue to accrue interest, and may be rolled over or refunded at anytime.
If you leave your DB plan account(s) with Colorado PERA until reaching the age and service credit requirements for retirement eligibility or age 65, you may request a lifetime monthly retirement benefit, roll over, or refund your DB plan account(s).
If you choose to receive a future retirement benefit, you should plan to apply for it about 90 days before the date you are eligible to begin receiving a benefit. To determine eligibility date or to request an estimate of future benefits, e-mail Colorado PERA's Customer Service Center.
Always keep Colorado PERA informed of any address change.