Plan Withdrawal Options
- Account withdrawals
- Things to consider
- Withdrawal options
- How to elect a form of payment
- Tax withholding and penalties
For complete plan information, refer to the SBS plan booklet. In the event the content on this web page differs from the plan booklet, the plan booklet shall prevail.
Funds may be withdrawn at any age in the event of:
- Separation from service (includes retirement)
You are not eligible to begin taking payment from the plan until you terminate state or participating political subdivision employment. In the event of your death, funds will be available to your beneficiary. Your money remains invested until your account balance is zero.
Withdrawals are made directly to you or your beneficiary or to another qualified plan on your behalf at your direction. There are only three recognized exceptions that would allow your account to be paid directly to another person or agency other than yourself. They are:
- An IRS Lien for unpaid taxes
- A Qualified Domestic Relations Order (QDRO) issued by a court of law
- An Order to Withhold and Deliver Property issued by the Child Support Services Division (CSSD)
Things to Consider
When you terminate employment and have an opportunity to withdraw your funds, please consider the following:
- SBS-AP funds are taxable income as you receive them. You may want to choose a method of payment that spreads your account balance across tax years.
- Consider your future needs before cashing out your SBS-AP nest egg, particularly your future retirement years. Experts say most people will live on retirement benefits longer than they worked to earn them. Using SBS-AP as part of your future retirement income will reduce your risk of outliving your money.
- Alaska Supplemental Annuity Plan and management fees are very low compared to the private sector. If you are planning on reinvesting your money, be sure to compare the fees for the services you will receive from a private provider versus the fees you pay for investment advice from the plan if you leave your money in the plan.
The actual dollar amount you will receive depends on such factors as the amount of your contributions, how your investments performed, the payment option you select and your life expectancy. When you terminate, your account value may be applied to the payment option(s) you choose. These options include:
- Lump Sum
- A single payment of your account balance, or partial distribution of a portion of it.
- Five-Year Period Certain Annuity
- Equal monthly payments for five years (60 months). If you die before receiving all 60 payments, your beneficiary will receive the remaining benefit payments.
- Ten-Year Period Certain Annuity
- Similar to the five-year period certain but for ten years (120 months).
- Fifteen-Year Period Certain Annuity
- Similar to the five-year period certain but for fifteen years (180 months).
- Single Life Annuity
- Monthly payments for your lifetime. No payments are made to your beneficiary after your death.
- Single Life Annuity with Ten-Year Period Certain
- Monthly payments for the rest of your life. If you die before 120 payments have been made, your beneficiary will receive the remaining benefit payments.
- Single Life Annuity with Fifteen-Year Period Certain
- Monthly payments for the rest of your life. If you die before 180 payments have been made, your beneficiary will receive the remaining benefit payments.
- 50% Joint and Survivor Annuity
- Monthly payments for your lifetime. After your death, your survivor will receive one-half of the monthly amount you were receiving for his/her lifetime. Your survivor does not have to be your spouse.
- 100% Joint and Survivor Annuity
- Similar to the 50% Joint and Survivor but, after your death, your survivor would receive the same benefit amount you were receiving for his/her lifetime. Your survivor does not have to be your spouse.
- Periodic Payment
- A payout method that allows you to be paid by either selecting a specific dollar amount or the number of years over which your account will be paid to you, or by selecting IRC Minimum Distribution payments (you may choose the frequency of your payments as (monthly, quarterly, semiannually or annually). You can make changes to the payment frequency or amount, or stop it.
How to Elect a Form of Payment
Payments are authorized 60 days after termination of employment (for any reason). You should allow for a minimum of five business days after payment is authorized before you will receive your distribution.
To begin receiving payment you must meet the requirements stated above. Next, you must submit the Distribution/Direct Rollover Request form to Empower Retirement for payment. You should complete all sections of the form that apply to you. Each section serves a specific purpose and helps to determine if all requirements for payment have been met. Payments will not be issued without receipt of the required payment form.
The date of payment depends on when the Distribution/Direct Rollover Request form is received, and your termination date. Assuming the 60 day waiting period has been met, payment can be made within five business days of receipt of the completed form by Empower Retirement.
If you have been involved in a divorce, dissolution, or legal separation, you must submit proof of these circumstances before you can receive payment of your account. You must provide a court-certified copy of the appropriate divorce, dissolution, or QDRO. Because of the very detailed and specialized nature of this type of situation, you should contact the Division of Retirement and Benefits at the earliest possible time so that you know what specific information we need.
You should be aware that making any false or fraudulent statement for the purpose of obtaining benefits or to avoid making payments due to others is a criminal offense punishable by law. Depending on the payout option you select, you may be required to provide proof of birth date for yourself as well as your designated survivor. A birth certificate or a driver’s license is considered acceptable forms of proof of birth date.
If you are terminated from employment and not subject to the IRS Required Minimum Distribution rule and do not desire to be paid currently, you do not need to submit a Distribution/Direct Rollover Request form until the time you wish to be paid or reach the required distribution age.
Tax withholding and penalties apply
Your payment will be taxed in the current year unless you roll it over. However, if you receive the payment before age 59½, you also may have to pay an additional 10% tax penalty. Direct transfers to Roth IRAs are reported as taxable income but are not subject to the additional 10% tax penalty.
Under the State Taxation of Pension Income Act of 1995, monies received from plans such as the SBS-AP are also taxed using the state of the recipient’s residence, which is determined by your address. State mandatory withholding will be taken from your distribution depending on your state of residency.
For more information, refer to the SBS plan booklet.