Options for Former Employees

Once you leave your current employer, you have a variety of options and are eligible to take a distribution at any time.

Non-State Public Employers
Distribution Summary

 

Wait to take a distribution

If you choose to leave your money invested in RIC after leaving employment, no forms are necessary. When you leave your current employer, your money may stay fully invested in RIC until you decide to take income or reach the age at which IRS required minimum distributions (RMD) must begin.

You have access to your account to make investment selection changes, provider changes, or distributions at anytime (inactive provider products may have restrictions and/or fees).

Income options (taxable)

To request a distribution, call your provider directly.

You may take income in one or any combination of ways shown below.

  • Total lump sum distribution
  • Partial lump sum distributions
  • Systematic/periodic payments (flexible)
  • Lifetime payments (irrevocable)

IRS Annual Required Minimum Distributions (RMD)

Required minimum distributions (RMD) from RIC accounts must begin by the IRS required beginning date. Failure to begin distributions on time may result in an IRS penalty on the RMD amount. Mandatory tax withholding applies to taxable distributions; exemptions include RMDs taken on time, lifetime annuity payments or taking a series of equal payments for 10+years. If exempt, taxes will be withheld unless elected otherwise.

Your provider will calculate your RMD upon request. If you do not elect a lifetime income annuity option, you are free to take more than your required minimum amount at anytime.

To request a distribution, please contact your provider to determine what payment options are available in your investment.

Tax Treatment of distributions

  • 457 Pretax Assets
    Taxable distributions of pretax 457 assets are taxed as ordinary income and reported on an IRS 1099 Form. 457 assets have no age penalties once separated from employment.

  • 401a Pretax Assets
    Taxable distributions of pretax 401a assets are taxed as ordinary income and reported on an IRS 1099 Form and subject to an IRS 10% penalty prior to age 59 1/2.

  • 457 Roth (post-tax) Assets
    Roth contributions are tax-free at distribution but the earnings (if any) are tax-free only if qualified.

"Qualified" distributions of Roth assets require all the following:

  • You have a distributable event:
    • Separation of employment
    • Age 70 ½, death
    • Eligible cash out (small accounts)
  • You have held your account for 5 years or longer
  • You are either 59 ½ or older, disabled, or deceased

Purchase IPERS credits

When you file to receive IPERS benefits, you may request to move money (plan-to-plan transfer) from your RIC pretax 457/401a accounts to IPERS to purchase eligible IPERS service credits. This is a non-taxable transfer. Other tax-advantaged accounts such as IRAs, 401(k)s, 403(b)s, etc., may also be options for funding an IPERS purchase.

To explore the possible benefits of purchasing IPERS and determine your eligibility, review Purchasing Service on the IPERS website. If you have questions, contact IPERS toll free at 800-622-3849 (281-0020 in Des Moines) or email them at Info@ipers.org.

If IPERS approves your request to purchase, they will send you a cost quote. You may request to rollover your pretax RIC 457401a money to make the purchase. Simply forward to us (fax 515-281-5102) your IPERS Rollover/Transfer form and a copy of your IPERS cost quote; we will request the rollover from your provider. RIC will send you a copy of your rollover paperwork (signed by RIC) and your provider will send you a check for the amount you requested. Forward the check and the IPERS forms to IPERS within 60 days to complete the purchase.

Rollovers

When you leave your current employer, you have the option to roll over all or a portion of your RIC assets. This is a non-taxable event. Please Note: 457 money rolled out of RIC loses its “no age limitation” status.

  • Pretax 457/401a assets may roll to an eligible IRA at any financial institution or a 457, 401(k), 401(a), 403(b), 403(a), or SEP plan.
  • Post-tax Roth 457 assets (if allowed by your employer) may roll to an eligible Roth IRA or other 457 Roth.

If you wish to request a rollover, contact your provider.