Distributions & Changes (SOI)

Your RIC accounts are very flexible when it comes to distribution options. When your goals, risk tolerance, or retirement income needs change, ask a provider representative at no additional cost, to help you make changes to your accounts.

If your beneficiary, name, address or investment selections needs updating, your request is made to your RIC provider directly.

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 penalties for qualified withdrawals prior to age 59 1/2.
• 401a Pretax Assets
  Taxable distributions of pretax 401a assets are taxed as ordinary income and reported on an IRS 1099 Form and may be 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 and
  • You are either 59 ½ or older, disabled, or deceased

Distributions While Employed

Options for distributions while employed are limited to the following conditions (loans are not an option):

• You have experienced an unforeseeable emergency
• You qualify for a small account cash out
• You are at least age 70 1/2

Unforeseeable Emergency (457 account only)

The unforeseeable emergency provision may allow you to withdraw funds from your 457 employee contribution account due to a financial hardship if you meet strict federal guidelines. To apply for an unforeseeable emergency withdrawal, complete an Unforeseeable Emergency Withdrawal Form. This distribution is taxed as ordinary income.

Situations that might qualify for withdrawal:

• unreimbursed medical expenses & related lost wages
• funeral expenses (legal dependent)
• loss of spouse’s employment or wages
• foreclosure of or eviction from residence

Small Account Cash Out Provision (457 account only)

If you are currently employed by the State, you may qualify for a cash out distribution from your 457 account. Cash out distributions are taxed as ordinary income. Funds will be paid if you meet ALL of the following:

• you have not made contributions to the Retirement Investors' Club (RIC) for at least two years (24 months) and
• your total 457 account value is $5,000 or less and
• you have not previously received monies from the account, other than for an unforeseeable emergency.

To request a cash out, please complete the RIC Distribution Form. Some inactive providers may have fees for distribution. Please consult with your investment company to determine if surrender charges apply to your account.

Age 70 1/2

You may begin to take distributions from your accounts at age 70 1/2 even if you are still employed. The federal government has established rules for plans like the Retirement Investors' Club (RIC) that apply when participants reach age 70 1/2.

You may elect to receive the entire value of your account, partial withdrawals of at least your required minimum amount annually, or periodic payments based on your life expectancy. To request a distribution, please complete the RIC Distribution Form. Please consult your investment company's representative to determine what payment options are available in your investment.

You may contribute to your account while you are employed, even if you are receiving distributions. 

Ineligible Events

You are not eligible to receive a payout from your Retirement Investors' Club (RIC) account for any of the following:

• purchase of a home
• college tuition
• warding off bankruptcy
• divorce
• overdue bills

Former Employee Distribution Options

Once you leave State employment, you have a variety of options and are eligible to take a distribution at any time. See Distribution Summary.

If you choose to leave your money invested in RIC after you leave employment, no forms are necessary.  When you leave state employment, your money may stay fully invested in RIC until you decide to take income or reach the IRS required beginning date for required minimum distributions (RMD).  

Income Options (Taxable)

To request a distribution, call your provider directly.

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

• Total lump sum distribution (inactive providers may have surrender charges)
• Partial lump sum distributions
• Systematic/periodic payments (flexible)
• Lifetime payments (irrevocable)

If you wish to take a distribution from any provider other than those listed above, you will need to complete the RIC Distribution Form. Call the inactive provider to ask if they also require their own distributions form and if withdrawal restrictions or penalties will apply.

Required Minimum Distributions

The IRS requires that you begin taking annual minimum distributions by the IRS required beginning date.  If you fail to begin taking your requirement minimum payments on time, you will be subject to an IRS penalty on the amount you should have taken.

Your provider will calculate your required minimum distribution amount upon request. You may elect to receive the entire value of your account or you may receive periodic payments over your life expectancy. If you do not elect a lifetime payment option, you have the option to take more than your required minimum amount at anytime.

To request a distribution, please contact your provider.

Purchase IPERS credits

When you file for IPERS benefits in retirement, you may request a transfer RIC pretax 457/401a money to IPERS to purchase eligible 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 Service Purchase on the IPERS website. If you have questions, contact IPERS:

• phone toll free, 800-622-3849 (515-281-0020 in Des Moines)
• email, info@ipers.org

If IPERS approves your request to purchase, they will send you a cost quote.

Rollovers

Once you leave state employment 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 may roll to a eligible Roth IRA or other 457 Roth plan.

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