Termination Before Retirement
If you leave your job before you are eligible for retirement, you may have several options available to you. First, you should contact either your department payroll clerk or the SBCERA office to request the required forms.
Upon termination from employment, there are five possible options. Your eligibility for the different options will depend on how many years of service credit you have and/or what type of employee contributions you selected. The options and eligibility requirements are explained below:
Deferred Retirementleaving your contributions and interest on deposit with SBCERA so that you can begin receiving a pension in the future. (Available only if you are fully vested with at least five years of service credit.)
Deferred Retirement with Reciprocityleaving your contributions and interest on deposit with SBCERA because you are going to work for a county or agency that has a reciprocal arrangement with SBCERA and you want the two retirement systems to be linked.
A Rolloverwithdrawing your refundable contributions and the interest credited on them by having the tax-deferred portion rolled over directly to an IRA or a new employer’s plan, and having any after-tax portion made payable to you. The amount rolled over will be net of a withdrawal charge of one-half the interest credited to the account, up to a maximum charge of $40.
A Lump-Sum Refund (payable to you)taking payment of all of your refundable contributions and the interest credited on them. The amount refunded will be net of a withdrawal charge of one-half the interest credited to the account, up to a maximum charge of $40.
A Combination Rollover/Lump-Sum Refund- electing to rollover part of your tax-deferred contributions to a qualified IRA and taking the remainder of refundable contributions and interest credited on them payable to you. The total distribution (rollover + refund) will be net of a withdrawal charge of one-half the interest credited to the account, up to a maximum charge of $40.
NOTE: Selecting a rollover or refund option will end your membership in SBCERA and thus any eligibility for future retirement or disability retirement benefits. Also, these refunds may be subject to taxes and penalties, depending on your age. You will receive the appropriate forms and tax information from SBCERA or your payroll clerk.
You can avoid mandatory withholding of 20% for federal income taxes by selecting the rollover option. If you choose this option, the portion of your contribution account eligible will be rolled over directly to an IRA or other qualified plan.
Eligibility Requirements for Termination Options
Less than Five (5) Years of Service Credit
If you leave before you have earned five years of service credit, your options will depend on what type of employee contributions you selected when you joined SBCERA:
If you selected nonrefundable contributions, your only option is deferred retirement with reciprocity. If your new employer does not have a reciprocal arrangement with SBCERA, you forfeit your contributions and interest.
If you selected refundable contributions, you can select deferred retirement with reciprocity, leave your monies “on deposit” for future determination or elect one of the refund options. If your new employer does not have a reciprocal arrangement with SBCERA, you must choose one of the refund options.
If you apply for a refund or rollover, it will be issued no later than six months after your termination date. Most refund checks are issued about 60 days after an employee terminates.
If you choose deferred retirement with reciprocity, your SBCERA contributions and interest will have to remain on deposit with SBCERA for as long as you remain employed in a reciprocal arrangement.
If you choose to leave your refundable contributions on deposit with SBCERA, they will continue to accumulate interest. You may request a refund of your accumulated contributions at any time.
Five (5) or More Years of Service Credit
If you have five or more years of service credit, you are fully vested in the Retirement Plan. “Vested” means that you are entitled to begin receiving a retirement benefit in the future when you would have been eligible to retire if you had stayed actively employed. You are thus eligible for a deferred retirement.
You may also choose one of the refund options orif your new employer has a reciprocal arrangement with SBCERAa deferred retirement with reciprocity.
If you choose a deferred retirement and later decide you want to withdraw your refundable contributions, you may do so at any time before retirement. However, if you choose deferred retirement with reciprocity, your SBCERA contributions and interest will have to remain on deposit with SBCERA for as long as you remain employed in a reciprocal arrangement.
How to Select Your Termination Option
To elect any of these options, you must complete and submit the required SBCERA forms. Please know that for reciprocity, you must join the retirement system of your new employer within 180 days after your termination date. If your entry into that system happens later than 180 days post termination, then you are not eligible to establish reciprocity.
If you choose a deferred retirement with reciprocity, your new employer may base your contributions to its retirement system on your SBCERA entry age. If you make this choice, you cannot later change your mind and have your contributions and interest refunded from SBCERA; that restriction will be in place as long as you are covered by a reciprocal arrangement.