Leaving an Alaska TRS job: refund or wait?

Short answer: with 8 years of membership service you're vested: you can leave your contributions in and start a pension at your tier's age. A refund pays back your contributions and interest but gives up your service. Refund taxes are on the taxes page; buying back refunded service is on service credit. Estimate the pension you'd keep in the calculator.

Vesting

Vested with any one of: 8 paid-up years of Alaska TRS membership service; 5 paid-up years of membership plus at least 3 paid-up years of Alaska BIA service totaling at least 8; 12 paid-up school years of part-time membership service (at least one-half year part-time or one full year full-time in each); or, if first entered before July 1, 1975, 15 paid-up years of credited service with the last 5 as membership service. You must leave your contributions in the Alaska TRS to stay vested. Handbook (2011), p. 17, Vesting; Seminar handout (Jan. 6, 2025), slide 4; AS 14.25.110(a)(1)-(3); AS 14.25.220

Waiting past your normal retirement age after you've left doesn't raise your benefit. Handbook (2011), p. 17; Seminar handout (Jan. 6, 2025), slide 8

Refunds

After leaving Alaska TRS employment you can request a refund of your employee contribution account (mandatory contributions, indebtedness payments and interest), not employer contributions. You must be terminated at least 60 days. A refund forfeits your service, your tier and all Alaska TRS DB benefits including retiree medical. Married (or previously divorced) members need spousal consent or proof the former spouse has no entitlement. If you do not apply for a refund or benefit before July 1 after your 75th birthday or within 50 years of your last active date, you forfeit it. Handbook (2011), pp. 6-7, Refunds; Time Limit for Refund or Benefit; AS 14.25.150, 14.25.205

Tax: Untaxed contributions refunded directly have 20% federal withholding; direct rollovers avoid it. A penalty may apply before age 59-1/2. Contributions made before Dec. 31, 1990 were already taxed. Handbook (2011), p. 7, Tax Considerations

Check with Alaska TRS From the 2011 handbook. The 2011 handbook says your account earns 4.5% a year, annual, posted July 31. The statute leaves the rate to the board each year. Why that matters

Buying back a refund

Refunded service can be reinstated by paying the indebtedness. DRB suspended this option from July 1, 2010 until the January 2022 Alaska Supreme Court decision in Metcalfe v. State; unpaid reinstatement service does not count toward vesting or eligibility. Seminar handout (Jan. 6, 2025), slide 12, Reinstatement Indebtedness

Tier III (DCR plan)

Always 100% vested in your own contributions. Employer contributions vest 25% at 2 years, 50% at 3, 75% at 4, 100% at 5. If you take a distribution and later return, employer vesting starts over at 0%. DCR handbook (2025), p. 6; p. 28; DCR Features and Highlights (2026), p. 2, Vesting

Available 60 days after a bona fide termination (if not rehired in PERS/TRS in that time); up to two partial withdrawals a year; you may defer until April 1 of the year after you reach 73. Options: lump sum, periodic payments, 5/10/15-year period certain, single life (with or without 10/15-year certain), 50% or 100% joint and survivor annuities, rollover. Annuities are irrevocable. A 10% IRS penalty may apply before 59-1/2; lump sums have 20% mandatory withholding. DCR handbook (2025), pp. 28-30, Distribution Options; DCR Features and Highlights (2026), p. 4, Withdrawals

The facts

• In Tiers I and II you are vested with 8 paid-up years of Alaska TRS membership service (other routes: 5 years of membership plus 3 of Alaska BIA service; 12 school years of part-time service; or 15 credited years if you entered before July 1, 1975). Vested members can leave and still draw a pension at retirement age, as long as they leave their contributions in.Handbook (2011), p. 17, Vesting
• If you leave Alaska TRS employment you can request a refund of your contributions plus interest (not the employer's share) after you have been gone at least 60 days. A refund forfeits your service, tier, pension and retiree medical coverage. A married member needs the spouse's written consent.Handbook (2011), pp. 6-7, Refunds
• Alaska TRS withholds 20% federal tax from a refund paid to you; a direct rollover to an IRA or another plan avoids it. A tax penalty may apply before age 59-1/2.Handbook (2011), p. 7, Tax Considerations
• Inactive members who never apply for a refund or a benefit by July 1 after their 75th birthday, or within 50 years of last being active, forfeit them.Handbook (2011), p. 7, Time Limit for Refund or Benefit
• In the DCR plan you are always 100% vested in your own 8% contributions. The employer's 7% vests 25% at 2 years, 50% at 3, 75% at 4 and 100% at 5. You can take money out 60 days after you leave.DCR handbook (2025), p. 6; p. 28; AS 14.25.390

See also taxes and buying service credit.

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