Leaving SURS/Terminating Employment – Traditional/Portable
Leaving SURS/Terminating Employment – Traditional/Portable
Although you may intend to stay with a SURS-covered employer until retirement, the time may come when your personal situation prevents you from doing so. The following are your options should you leave the system entirely:
Leave funds on file: You may elect to leave your funds on file. You may elect to take a distribution at a later date; however, a distribution must be made to you by the April 1st following the year you reach age 70 ½ if you are not employed with SURS or a State of Illinois reciprocal system at that time.
Apply for a retirement benefit: If you meet the age and service requirements for a retirement benefit, you may apply for retirement benefits upon termination of employment. If you have not met the age requirement, you may leave your funds on file until you become eligible for retirement benefits. You must begin the annuity by the April 1st following the year you reach 70 ½ if you are not employed with SURS or a State of Illinois reciprocal system at that time.
Receive a separation refund: You may receive a one-time lump sum distribution. No partial distributions are allowed. You may only receive one refund per academic year. By accepting a separation refund, your claim to future benefits will be forfeited.
You may elect to receive your refund as a lump sum paid directly to you.
- If your refund is less than $200, SURS is not required to withhold any federal income tax. However, if you wish to have federal income tax withheld, SURS will withhold a minimum of 5%, or a higher percentage of your choice.
- If your refund is $200 or more, SURS is required by law to withhold a minimum of 20% for federal income tax.
- Your refund is subject to an IRS 10% early withdrawal penalty unless:
- You are over age 59 ½;
- You terminated employment after age 55;
- You have medical expenses large enough to be deducted on Form1040, Schedule A; or
- You are a public safety employee who terminated employment after age 50.
Note: The 10% penalty is not withheld by SURS. It is calculated on IRS Form 5329 to be filed with your federal tax return for the tax year in which your refund is paid.
You may defer taxation by rolling the taxable portion of your refund directly from SURS to an IRA, a qualified 401(a) retirement plan, a 403(b) plan, or a Governmental 457 plan. If you arrange a trustee-to-trustee transfer, there will be no federal income tax withheld. Most rollovers are not subject to federal income tax. However, they are subject to taxation, according to IRS regulations, at the time of withdrawal. Rollovers to Roth IRAs are taxable at the time of the rollover.
You should consult a tax advisor with questions regarding a rollover or taxation of your separation refund.
You will receive a 1099-R to file with your federal tax return the January following the tax year in which your refund is paid. Your refund is not subject to State of Illinois income tax.
- If you elect to leave your funds on file, no further action is required on your part. Please keep SURS updated with any address changes. For more information click on Family Changes tab on the Life Events bar.
- If you wish to apply for a retirement benefit, please refer to the Retirement Life Event for further information. (Link to Traditional/Portable Retirement Life Event)
- If you wish to receive a separation refund, continue to Step 3.
To receive a separation refund, you must have terminated your employment from all SURS-covered employers or you must have been on layoff for over 120 days. If you wish to withdraw your funds from SURS, you must complete an Application for Separation Refund. Depending upon your citizenship status, you may also be required to submit an IRS Form W-9 or W-8BEN.
To obtain the required SURS paperwork:
- Dial Toll Free: 800-275-7877
- Dial Direct: 217-378-8800
When you call to initiate the refund process, you will also need to provide the SURS representative with the following information:
- Your name and Member ID number
- Date of termination of employment
- Whether you wish to have the funds paid directly to you or rolled to an eligible retirement account. If you wish to have the funds sent to a financial institution, you must provide SURS with the following information regarding the financial institution:
- Account Type
- Account Number
- ACH Routing Number (checking and savings accounts only)
An Application for Separation Refund will be mailed to you containing the information you supplied to the SURS representative. Upon receipt, you should verify that all information is accurate, include any additional required documents, sign the form, have it notarized, and return it to SURS within 45 days.
In addition to the refund application and any other applicable forms, SURS will request specific information from your employer. To complete the refund processing, your employer must submit the certification of your employment, the date of termination of employment, and all final payroll information if not already on file.
You should contact your employer to determine their resignation process and complete any required paperwork.
- Average Processing Time is currently 45-60 days from the receipt of all information.
- Delays in Finalizing Separation Refund Claims: Your separation refund will be processed once SURS receives all information from you and your employer. There are several reasons why a claim may not be finalized within the average processing time. The following are the most common:
- Receipt of employer information: The response time of your former employer affects the processing time required to finalize your claim. If the information reported by your employer is inconsistent with the information SURS has on file, SURS will contact the employer for clarification.
- Response from member: If SURS requests additional information or paperwork from you, it must be submitted before your separation refund can be processed.
- 30-Day Waiting Period: 30 days must past from your last SURS-covered payroll before the refund will be processed.