Leaving the TPAF: take a refund, or keep your pension?

Vesting

Vested after 10 years of service credit: guaranteed a retirement at normal retirement age (60 for Tiers 1-2, 62 for Tiers 3-4, 65 for Tier 5). Membership expires after 10 consecutive years without contributions (15 if vested). Guidebook p. 12, Vesting; p. 43, When Membership Ends Your tier sets your Deferred Retirement age (see which tier am I?), and the amount comes from the usual formula on the service you have when you leave.

Deferred Retirement

Guidebook p. 26, Deferred Retirement; N.J.S.A. 18A:66-36(b)

While you wait, your life insurance ends. If a deferred retiree dies before the Deferred Retirement starts, the beneficiary receives a return of contributions; there is no life insurance benefit. Guidebook p. 26, Deferred Retirement

Not vested? Your age can still matter

If you leave with under 10 years but are old enough, you can still get a monthly benefit:

• Tier 1: age 58 or older
• Tier 2: age 58 or older
• Tier 3: age 60 or older
• Tier 4: age 60 or older
• Tier 5: age 63 or older

Guidebook p. 43, Terminating Employment

The refund

After leaving covered employment before retirement you can withdraw all your contributions with 2% interest, less any loan or other obligations; no interest if you were a member for less than three years. Partial withdrawals aren't allowed. Withdrawing ends all rights; a vested member (or one at retirement age) must sign a waiver of retirement and death benefits. Not vested: you can leave the money in and keep your service if you return within 10 years. Contributions left in over 10 years earn no interest. Guidebook pp. 43-44, Withdrawal

Taxable portion has 20% federal withholding unless rolled over directly; possible 10% additional tax before age 59 1/2. Guidebook pp. 43-44, Withdrawal (More on taxes.)

What the NJDPB says

• If you leave with at least 10 years of service before the service retirement age, you can apply for a Deferred Retirement. It is figured with the regular formula and starts the first of the month after you reach 60 (Tiers 1-2), 62 (Tiers 3-4) or 65 (Tier 5).Guidebook p. 26, Deferred Retirement
• You must file for a Deferred Retirement before you reach that age to keep your choice of payment options; otherwise the only option is the Maximum. It can never start before the Division receives your application.Guidebook p. 26
• Check with NJDPBThe statute text for deferred retirement mentions only ages 60 and 62. The guidebook says 65 for Tier 5, which matches Tier 5's service retirement age.N.J.S.A. 18A:66-36(b); Guidebook p. 26Guidebook and statute text differ for Tier 5; we follow the guidebook.
• While you wait for a Deferred Retirement, your life insurance ends 31 days after you leave. If you die before it starts, your beneficiary gets your contributions back but no life insurance.Guidebook p. 26
• You are vested after 10 years. If you leave before vesting you can withdraw your contributions or leave them in; the account expires after 10 years without contributions (15 if vested).Guidebook pp. 12, 43
• A refund is your contributions plus 2% interest (no interest if you were a member less than three years), minus any loan. Partial withdrawals aren't allowed, and withdrawing ends all membership rights.Guidebook p. 44, Withdrawing Contributions
• The taxable part of a refund paid to you has 20% federal tax withheld unless you roll it over, and may owe a 10% extra tax before age 59 1/2.Guidebook p. 44

Questions

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