Leaving your job before you’ve reached retirement age
If you leave your employer before you’re ready to retire, you have a variety of options of how to handle your retirement plan account, based on your years of service, your age, and what type of MERS plan you have.
Not sure what you have? Help figuring out what MERS program you have.
If you leave your job before you’ve reached retirement age, your options depend on whether or not you’re vested, and how much service credit you have earned.
Here are a few things to keep in mind:
- If you leave employment and are vested, you may defer your benefits until you meet the age requirements.
- If you are not vested when you terminate but have at least one year of service credit, you have up to 20 years to go to work for another MERS employer to earn the additional service credit you need to become vested.
- If you make employee contributions, you may have some additional options.
Other MERS Service and Act 88
View the Defined Benefit Handbook to learn about ways you can use your previously accrued MERS time.
If you leave your current employer, you can keep your account with us, roll over all or a portion of your account to another qualified plan, or begin withdrawing money from your account. If you have employments with other participating municipalities, be sure to request a Service Verification of your account to determine if any of your previous time may be used to coordinate service.
Before you decide, you should consider the tax consequences of receiving payments. Contact your financial advisor for more information about which option is best for you.
Account Balance: As of January 2016, terminated participants with a MERS Defined Contribution account balance of $1,000 or less will be assessed an annual low balance account fee of $15.
What are my options?
- Keeping Your Account
You can leave your account with MERS and access it at a later time, or when you’re ready to retire. A change in employment status doesn’t require a change in your MERS Defined Contribution Plan account. Required minimum distributions go into effect the year you turn age 73 (if you were born 1/1/1951 or after), age 72 (if you were born before 1/1/1951), or 70½ (if you were born before 7/1/1949).
- Full Rollover
You can also choose to roll your account into another qualified retirement program or into a personal IRA account. This allows you to avoid the 20% mandatory federal income tax withholding and any early withdrawal penalties; however, you may lose your state income tax break.
- Partial Rollovers
Distribution of after-tax contributions from the plan may be rolled into either a Traditional IRA, Roth IRA or to certain employer plans that accept rollovers of after-tax contributions and separately account for them.
- Withdrawing Funds
You have a variety of options. You can begin withdrawing some or all of your money. If you leave employment before Jan. 1 of the year you turn 55, penalties may apply.
- Stable Income Annuity
The MERS Stable Income Annuity allows you to convert your retirement account or savings into a guaranteed income stream for life, or a period of your choice.
For more information, review the Special Tax Notice included with the Distribution forms.
Note: If you are changing jobs and would like to roll over or withdraw funds in your MERS Defined Contribution Plan, you can submit your request online through your myMERS account.
To do so, log into myMERS and click on the link for the product you’re requesting a distribution from on the left navigation bar on the page, then click on “Manage Account.” Then click on the “Distributions” link on the left navigation bar to make your request.
Medallion signature guarantees is required for the following:
- Any request to have funds wired or sent via direct deposit.
- Any distribution greater than $100,000 received via paper form or online request.
- Mailed to an address that is different than what is in the myMERS.
- Any address that is outside of the United States.
Note: requests for a distribution that occur immediately following a change of address in the MERS system, are held for an additional 10 business days as an added security measure.
The Medallion signature guarantee can be obtained at most banks and credit unions. This guarantee authenticates the validity of the request (and the requestor) and protects you by making it harder for people to take your money by forging your signature on your securities certificates or related documents. Note: a Medallion signature guarantee is not the same as a notary.
Please send all distribution forms that require a Medallion signature guarantee to our recordkeeper, Alerus. These forms cannot be accepted via e-mail, online or fax (the original “signature” is required). The Alerus address can be found on the distribution form. Distribution forms can be found in the “Resource Library” link at the top of your Defined Contribution or MERS 457 Account page on myMERS.
Other MERS Service and Act 88
View the Defined Contribution Handbook to learn about ways you can use your previously accrued MERS time.
You have options for both portions of your Hybrid Plan when you leave employment.
Hybrid Part I — Your Defined Benefit Portion
If you leave employment but are vested, you may defer your benefits and service until you meet the age requirements.
If you’re not vested when you terminate employment, you have up to 20 years to go to work for the same or another MERS employer to earn the additional service credit you need to become vested.
Required minimum distributions do apply to your Hybrid benefit (both parts I and II) into effect the year you turn age 73 (if you were born 1/1/1951 or after), age 72 (if you were born before 1/1/1951), or 70½ (if you were born before 7/1/1949).
Hybrid Part II — Your Defined Contribution Plan
If you leave employment before retirement age, you can do one of three things:
- You can keep the portion of your benefit that is the MERS Defined Contribution with MERS and continue to let it grow in MERS Investment Menu. It will be there for you whenever you want to access it — at a later date or when you’re ready to retire. Required minimum distributions apply.
- You can withdraw a portion or all of your money. Please be aware that some penalties may apply. For more information, you should review the Special Tax Notice at the back of our Defined Contribution Distribution/Direct Rollover Form (#MD-005) or call our Service Center.
- You can directly roll over your account into another qualified retirement program or personal IRA account.
Low balanced assessment: terminated participants with a MERS Defined Contribution account balance of $1,000 or less will be accessed an annual low balance account fee of $15.
Other MERS Service and Act 88
View the Hybrid Handbook to learn about ways you can use your previously accrued MERS time.
Once you’ve separated from your employer, you can begin using the money in your MERS Health Care Savings Program account to receive reimbursements for medical expenses. Once your employer notifies us you’ve left employment, we’ll send you information on how to start using your account.
For more information, consult the MERS Health Care Savings Program Participant Handbook or call our Service Center.
When you leave your current employer, MERS offers you a variety of options for your 457 Program. Contact your financial advisor about which option is best for your situation:
Keep Your Account with Us
You can continue to keep your assets invested. You’re not required to do anything with your account until you’ve reached the age when you must begin taking required minimum distributions (RMDs). RMDs are the minimum amounts you must withdraw from your retirement accounts each year. Required Minimum Distributions go into effect the year you turn age 73 (if you were born 1/1/1951 or after), age 72 (if you were born before 1/1/1951), or 70½ (if you were born before 7/1/1949).
The MERS 457 Program offers flexibility when you are ready to withdraw on the account. You can begin using your account as soon as you leave employment.
Rollover a Full or Partial Amount
If you leave your employer, you can also roll over part or all of your account into another eligible plan.
To begin using your account, please complete the
457 Distribution/Direct Rollover Form (MD-405) and return it to us.
Account Balance: As of January 2016, terminated participants with a MERS 457 account balance of $1,000 or less will be accessed an annual low balance account fee of $15.
For more information, consult your MERS 457 Supplemental Retirement Program Participant Handbook or contact our Service Center.
Transferring jobs within your municipality
MERS RETIREMENT PLAN MEMBERS
If you are currently a Defined Benefit Plan, Defined Contribution Plan, or Hybrid Plan member, the effects of a transfer depend on whether your employer has the Standard Transfer Rules or has adopted the Plan Continuation Rules. Please ask your employer about what transfer (and rehire) rules apply. For more information, please read the Standard Participant Transfer and Rehire Rules on our website.
Standard Transfer Rules
Under the Standard Transfer Rules, if you transfer from one division to another (or return to the employer and are rehired), you must participate in the open, active retirement plan of the new division.
You’ll also need to complete the Participant Transfer Certification for Same Employer (Form 35b) and return it to your employer.
Plan Continuation Rules
If your municipality has adopted MERS Plan Continuation Rules, you will be enrolled in the same plan type as the division you are currently enrolled in (or were previously enrolled in, if you are a rehire), regardless of whether that plan is open or closed, if such a plan exists. When both open and closed plans of that type exist, you will be enrolled in the open plan. If the same plan type does not exist, you will be enrolled in the open plan for that division, regardless of plan type.
Under either rule above, where a plan offers an option in employee contributions, the plans’ default rate will apply to the transferring (and rehired) employee.
Please ask your employer about what transfer rules apply. For any employee transfer the Participant Transfer Certification for Same Employer (Form 35b) is required.
MERS 457 PROGRAM OR HEALTH CARE SAVINGS PROGRAM PARTICIPANTS
If you move to a new position or new division within your municipality, your MERS account will move and grow with you if that division offers the program in which you’re enrolled.
But, if the new division doesn’t offer the program, your account will stay safe with us. You’ll be able to access it once you’ve separated from your employer, based on the provisions of your program. Please refer to your program handbook for more information.