Participation in OPERS is mandatory for all eligible employees. During employment with a participating agency a member may not withdraw the contributions paid to OPERS. These funds are not available for loans or any other type of pre-termination distribution. Furthermore, a member who has already retired and is receiving a monthly retirement benefit cannot withdraw any contributions paid to OPERS. Only a member whose employment has terminated (without retirement) may withdraw his or her share of accumulated contributions. A member who withdraws contributions loses all service credit including prior service credit earned prior to the date of withdrawal and is no longer considered a member of OPERS.
Leaving Contributions With OPERS
If you choose to leave your accumulated contributions with OPERS, you retain OPERS membership. This means that you don't lose any service credit previously accrued and if you are reemployed by a participating OPERS employer, this previously accrued service will be used to determine the member's retirement benefits. Furthermore, if you choose to withdraw your contributions, you may find that you have additional or different eligibility requirements for retirement if you become an OPERS member again. By leaving the contributions with OPERS, you can have greater certainty in your eligibility for retirement.
A member who chooses to withdraw his or her share of accumulated contributions loses all service credit, including prior service credit, earned up to the date of withdrawal and is no longer considered an OPERS member. The employer's share of contributions always remains in OPERS. No accumulated interest or increased value is paid on employee contributions which are withdrawn.
If a member terminates employment and wishes to withdraw his or her share of the accumulated contributions, the member can do so provided that:
1. The member and member's Retirement Coordinator properly complete an Application for Withdrawal form and file it with OPERS as soon as possible after termination.
2. The member is not reemployed by an OPERS employer within 4 calendar months from termination date. This is a mandatory 4-month waiting period that can be waived only if the member is terminally ill, under certain circumstances.
Taxation of Withdrawn Contributions
The following is not intended to be tax advice. OPERS strongly encourages a member to seek the advice of a competent professional tax advisor before requesting payment of withdrawal.
Member contributions that were paid to OPERS by state employees after January 1, 1989, will be taxable in the calendar year in which the withdrawn contributions are received. A member who withdraws contributions which are taxable must have the mandatory taxes (currently 20% federal and 5% state tax) withheld from the payment made to them by OPERS unless the contributions are rolled over. The withdrawn contributions must be reported as income on the individual's income tax return. Individuals who withdraw taxable contributions will receive a 1099 Form at the end of the calendar year.
The receipt of a member's contributions may be subject of an early distribution penalty (currently 10%). The additional tax is imposed only in certain conditions and does have exceptions. For more info, consult IRS Publication 575 and as with all tax matters, consult a competent tax advisor.
Rollovers (Also see IRS publications 575 & 590)
A member who has terminated employment and decided to withdraw contributions, may elect to "rollover" any contributions directly to another qualified retirement plan or an IRA. If taxable contributions are rolled over, the IRS will not currently tax the contribution, and thus OPERS will not withhold the mandatory taxes (currently 20% for federal and 5% for state taxes).
NOTE: All members applying for withdrawal in OPERS will receive Tax and Rollover information and a Rollover Application no less than 30 to 60 days prior to the date scheduled for payment of the withdrawal.
A member who wishes to withdraw his or her share of accumulated contributions and who is not eligible to vest can expect to receive payment during the FIFTH month following the date of termination if all appropriate paperwork is on time and in order. OPERS will mail either:
1. a Withdrawal Letter if the contributions are not taxable or
2. a document entitled Important Tax Notice if any portion of the contributions are taxable.*
*approximately 2 months before the scheduled payment.
Cancellation of Payment
If a member returns to employment before the 4 month waiting period has elapsed, he or she must notify OPERS and the withdrawal will be canceled. If a member is reemployed by a participating OPERS employer within the 4 month waiting period and does not notify OPERS of the reemployment and receives a withdrawal payment, the employee must reimburse OPERS for the full amount of the withdrawal.
Application For Withdrawal
The Retirement Coordinator will complete Part 1 of the Application for Withdrawal. The member must complete, sign and date Part 2.
The member's mailing address on Part 2 must be accurate! If the address changes within the 4-month waiting period, he or she must do so in writing, with an original signature. This can be accomplished by letter or by completing a Change of Address form.
OPERS will send a Notice of Withdrawal to the member approximately 2 months after receipt of the Application for Withdrawal. This notice will inform the member of the date of payment and the approximate amount of payment.
Members who have withdrawn their contributions and later become employed by a participating OPERS employer may restore service credit lost due to the withdrawal. To do so, the member must meet the eligibility requirements for membership and, on becoming a member of OPERS again, pay OPERS the sum of the accumulated contributions withdrawn plus interest at 10% per year. This repayment will entitle the member to the service credit he or she would have received as if there had never been a withdrawal of contributions. The member's payment to this System can be made in a lump sum payment or through a payroll deduction for up to 60 months, with additional interest. See your Retirement Coordinator for details. Repayment of withdrawn contributions may be made one time only. Any further withdrawals cannot be repaid.