Treasury HomeContact Us

Forms



Additional Information

Calculators


Related Topics

 

  • Setting Up Benefit Payments


When is the earliest I may begin withdrawals?

Federal law permits withdrawals when one of the following occurs:

  • Termination of Employment with the State
  • Retirement (Regular, Early, or Disability)
  • Financial Hardship (as defined by the plan)
  • Age 59 1/2 (401(k) plan only)
  • Death

To be eligible for a distribution from either state plan based on termination or retirement, you must have received your final paycheck and you must have been separated from service for at least 30 days.

back to top

When is the latest I may begin withdrawals?
Under federal law, you must normally begin drawing benefits by the end of the year in which you reach age 70 1/2 or retire, whichever is later. At that point, the state's plans require your withdrawals to be set up so that they are expected to be paid out over your life expectancy or the dual life expectancy of you and your beneficiary, as determined by IRS Life Expectancy Tables. Depending on the withdrawal method you choose, you may be eligible to postpone your first payment until April 1 of the following year, but you would then need to take two years worth of required payments by December 31 of that year.

If you do not meet IRS distribution rules, federal law imposes a penalty tax equal to 50% of the amount you should have withdrawn that year but didn't. Refer to IRS Publication 575, Pension and Annuity Income for more information on IRS withdrawal rules.

If you have reached age 70 1/2 and wish to extend your withdrawals out over the longest period permitted by IRS, you may elect the Minimum Required Distribution payout option described in the next question or you may calculate your own minimum distributions each year. If you choose to calculate your own minimum distribution withdrawals, you will need to file a Lump Sum Distribution application each year for the amount you wish to withdraw that year.

back to top

What payment methods are available?
Benefits from either plan may be distributed in (1) a lump sum, (2) periodic payments, (3) minimum required distributions, or (4) an annuity. You may use a combination of more than one method of payment if you wish.

As you decide what payment method to use, you should consider what other sources of retirement income you will have, whether you will be old enough to draw social security benefits when you retire, whether you have dependents who will need this source of income after your death, what impact inflation may have on your retirement income, what your tax bracket will be when you retire, special tax treatments which may be available, and tax penalties which may apply.

1) Lump Sum Payment - You may elect to withdraw all or part of the funds in your account in one payment. If you have less than $5,000 in the plan, a total lump sum distribution is normally the only payment option available to you. If you were born before January 1, 1936 and have used the 401(k) plan for five years or more, you may qualify for forward income averaging tax treatment if you receive a total lump sum distribution. To elect a total or partial lump sum distribution, please contact Great West at (800) 922-7772 option 2 or local Nashville at (615) 244-1030 to speak with a representative.

2) Periodic Payments - You may elect to take periodic withdrawals directly from your account for a specified period or at a fixed dollar amount. Periodic payments may be set up to occur annually, quarterly, semi-annually, or monthly. During the payout period, your remaining account balance will stay invested in the product(s) you have chosen. Each periodic payment will be drawn proportionately from all funds you hold in the plan, unless you specify otherwise on your Distribution Request. To elect one of the following periodic payment plans, please contact Great West at (800) 922-7772 option 2 or local Nashville at (615) 244-1030 to speak with a representative.

  • Periodic Payments for a Specified Period
    You elect the total number of payments you wish to receive. For example, if you want monthly payments to last 10 years, you would indicate 120 monthly payments. Each payment amount will most likely vary with this method since your payment amount is determined by dividing the current account balance by the number of payments remaining. If you are age 70 1/2 or older and have terminated state employment, the period remaining may not exceed your life expectancy or the combined life expectancy of you and your designated beneficiary.
  • Periodic Payments of a Fixed Amount
    You elect the amount you wish to receive monthly, quarterly, semi-annually, or annually. A $50 minimum payment applies. The length of time your payments will last will vary depending on investment performance. If you are 70 1/2 and have terminated state employment, the payment amount must satisfy IRS minimum distribution requirements.
  • Interest Only Until Age 70 1/2
    If your entire account is invested in fixed (interest-bearing) products, you may elect to withdraw only the interest earnings until you reach age 70 1/2. Once you reach age 70 1/2, your payments would automatically be converted to the Automated Minimum Distribution Payout discussed below.

3) Minimum Required Distributions- If you are age 70 1/2 or over and want to take only enough out of the plan each year to avoid IRS penalties, you may elect a minimum required distribution payout. During the payout period, your remaining account balance will stay invested in the products(s) you have chosen. Great-West will recalculate your minimum distribution amount at the beginning of each calendar year. The gross yearly payment amount is determined by dividing your 12/31 account balance by the divisor from the current IRS Life Expectancy Tables. Once the yearly amount is determined, your individual payment amount is calculated based on your payment frequency. For example, your yearly distribution requirement would be divided by 12 if you are receiving monthly payments. The payment amount will vary from year to year depending on the performance of the investments in your account. To make this election, complete the Automated Minimum Distribution Request for 401(k) Plan or the Automated Minimum Distribution Request for 457 Plan.

4) Annuity Payments - You may elect to purchase an annuity from an insurance company under contract with the program. An annuity provides a series of payments for a specified period of time, for the lifetime of the participant, or for the lifetime of the participant and a beneficiary. The amount of each payment is determined by the amount invested, the type of annuity contract selected, the company's interest rate assumptions, and the actuarially projected length of the payment period. The portion of your account balance you use to purchase the annuity is transferred to the insurance company. Following is a description of the most common annuity choices.

  • Designated Period Annuity
    The insurance company will pay you a certain amount during the period you elect (usually 5, 10, or 15 years).
  • Life Annuity
    The insurance company will pay you a certain amount for as long as you live. Upon your death, there will be no more payments to your beneficiary.
  • Life Annuity with Period Certain Feature
    The insurance company will pay you a certain amount for as long as you live, and will pay your beneficiary the payments remaining in the “period certain” (usually 5, 10, or 15 years) if you do not live until the end of that period.
  • Life Annuity with Joint & Survivor Feature
    The insurance company will pay you a certain amount for as long as you are alive, and will continue payments to your beneficiary after your death at 100% or 50% of the original payment amount, depending on the option you elect.

If you elect to take an annuity, you may choose either a fixed or a variable annuity, or you may split your account between fixed and variable payouts. With a fixed annuity, the amount of each payment is guaranteed and will not change. Variable annuity payment amounts are not guaranteed and will either increase or decrease with investment performance. Contact Great-West for an annuity application.

back to top

How do I apply for benefits?
Refer to the Forms section of this site or contact Great-West for the appropriate Distribution Request Form(s). Before you file your application, you may request estimates of the amounts you would receive under various payment plans. When you approach retirement, you may want to set up an appointment with a local Great-West representative for retirement counseling. You may also want to consult your tax advisor.

back to top

Is direct deposit available?
If you elect to receive periodic payments or minimum distribution payments from your account, you will be eligible to have your payments deposited directly to your checking or savings account. Submit an 401(k) or 457 with your Distribution Request form. If you elect to purchase an annuity, there is a section on the Annuity Contract which allows you to authorize payments to be deposited directly to your bank. If you sign up for direct deposit, it is still important that you keep your address current with Great-West and/or your annuity provider. Even though checks won't be mailed to you, a 1099-R statement will be mailed to you each year.

back to top

Are there any charges on withdrawals?
None of the current investment options have any withdrawal (surrender) charges at retirement. Withdrawals from the American General Life Insurance product which was offered prior to January 1, 1986 may be subject to a $50 surrender charge.

back to top

When will my benefit payment(s) be issued?
Great-West issues lump sum distributions and periodic payments daily. If you select periodic or minimum distribution payments, you may choose which day of the month you wish to receive your distribution except for the 29th, 30th, or 31st. Annuity payments issued directly by ING are generally issued on the last business day of the month.

Once the Great-West office in Greenwood Village, Colorado receives your properly completed, signed, notarized, and approved Distribution Request for a lump sum payment, periodic payments, or minimum distribution payments, your payment(s) will be processed within ten (10) business days unless you have requested a later payment date. Annuity payments generally require six to eight weeks to begin.

back to top

What happens if I still have a 401(k) plan loan outstanding when I retire?
You may repay your loan in a lump sum with a personal check or you may have the outstanding balance treated as a taxable distribution.