Fill - Free fillable (MM/DD/YYYY) MAILING (State of Florida / Dept. of management Services) PDF form

FRS-M81

Effective 07/16

DROP Term/Refund

Florida Retirement System Pension Plan

Request For Refund of Employee Contributions

PO BOX 9000

Tallahassee, FL 32315-9000

Local Phone: 850-907-6500 Toll Free: 844-377-1888 Fax: 850-410-2010

*Q2*

Rule 60S-4.009 , F.A.C.

Page 1 of 1

MEMBER INFORMATION (please type or print):

MEMBER NAME:_________________________________________ MEMBER SSN:____________________

(First, Middle, Last Name)

DATE OF BIRTH :___________ DAYTIME PHONE:(_____)_____________ E-MAIL:____________________

(MM/DD/YYYY)

MAILING

ADDRESS:______________________________________________________________________________

(Street; including apartment) (City) (State) (Zip Code)

EMPLOYMENT INFORMATION:

List your last date of employment with any Florida Retirement System (FRS) employer: __________________

(Month/Day/Year)

List all employers you worked for within the last 3 months. In addition to FRS-covered employment, work

includes, but is not limited to part-time work, temporary work, other personal services (OPS), substitute

teaching, adjunct instructing or non-Division approved contractual services: ____________________________

________________________________________________________________________________________

IMPORTANT INFORMATION ABOUT REFUNDING EMPLOYEE CONTRIBUTIONS

1. To be eligible to receive a refund of your employee contributions you must terminate employment from all FRS

participating employers and remain off payroll with all FRS-participating employers for three complete calendar

months following your employment termination date. See list above for examples of employment with FRS

participating employers. If your FRS employer reports your position for retirement purposes, your employer

must also report your employment termination date to the FRS. For example: If you terminate your

employment July 6

, the earliest you may receive a refund of employee contributions is during the month of

November.

2. A refund of your accumulated employee contributions cancels the service credit represented by the

contributions. By receiving a refund, you waive all rights under the FRS (or other existing systems administered

by the FRS) to the service credit represented by refunded contributions.

3. Your non-employee contributory FRS service credit (if applicable) will not be affected by this refund.

4. If you are vested in the FRS Pension Plan your employee contributions can be left on deposit and qualify for

a future monthly retirement benefit.

5. Refunding employee contributions may have serious tax implications. Read the enclosed Special Tax Notice

Regarding Plan Payments for additional information and consult a tax professional if you have questions.

By signing this form, I am requesting a refund of all employee contributions and I acknowledge that I have

read and understand the above information.

MEMBER SIGNATURE: ___________________________________________ DATE: ________________

Return the completed form to the address or fax number listed above.

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SPECIAL TAX NOTICE

DEFERRED RETIREMENT OPTION

PROGRAM (DROP) WITHDRAWAL

AND PRE-TAXED REFUNDS

GENERAL ROLLOVER INFORMATION

Rollover Eligible Plans and Distributions

You are receiving this notice because all or a portion of

your DROP payment or refund from the Florida

Retirement System (FRS) Pension Plan is eligible to be

rolled over into one of the eligible Plans listed below:

• IRA: Traditional, Roth (non-designated),

Inherited Traditional or Roth, and SEP

• Eligible Employer Plans: 457(b) government

Plans, pre-taxed 403(b) and qualified plans

The FRS cannot make a DROP payment until you

have terminated your FRS employment. Refunds

cannot be paid until after you have terminated FRS

employment for three calendar months. Additionally,

payments cannot be paid for at least 30 days after you

receive this notice. After you receive this notice, you

have 30 days to select your payout option. However,

you may waive this notice period by indicating your

payout method on the required payout form. Your

distribution will be processed accordingly as soon as

possible after your payout form is received.

Only the FRS DROP payment and pre-taxed refunds

are eligible to be rolled over, not the FRS distributions

listed as follows:

• Monthly FRS Plan benefit payments, including

continued beneficiary payments

• Required minimum distributions after age 70½ or

72 (See Required Minimum Distributions) or after

death.

Payment Options

The required FRS DROP Selected Payout Method

Form (DP-PAYT) and FRS Pension Plan Refund

Payout Selection Form (REF-PAYT) has three payout

options. You can select a direct rollover into an eligible

plan, select a lump sum payment, or select a partial

lump sum payment and roll over the remaining balance.

A direct rollover election means the FRS will send the

payment directly to your selected eligible plan. Once

the amount is rolled over, it becomes subject to the

receiving plan’s tax rules.

A lump sum election means the FRS will send the

payment directly to you, minus 20 percent as required

for federal withholding taxes.

A partial lump sum election means the FRS will send a

portion of your payment as a lump sum to you, minus

the 20 percent federal withholding taxes. The FRS will

send the remaining portion as a direct rollover to an

eligible plan, subject to that plan’s tax rules.

Note: If your DP-PAYT form is not received within 60

days of your DROP termination date, the FRS is

required by law to pay a lump sum distribution of your

DROP payment minus the required 20 percent

withholding tax.

If, after you receive a lump sum payment, you decide to

roll some or all of this payment into an eligible plan, you

have 60 days from the payment date to complete the

rollover. You should roll over the entire pre-taxed (100

percent) gross amount into a pre-taxed eligible plan,

or you will have to pay federal income taxes on the

difference. This means you would have to pay the 20

percent you did not receive due to the required lump

sum withholding taxes. However, this amount may be

recovered when you file your annual tax return.

For example: Let’s say your gross (pre-tax) DROP

balance is $10,000 and you choose to have the FRS

pay the entire amount directly to you as a lump sum

payment. The FRS withholds 20 percent, or $2,000,

and you’ll receive a check for the net (after-tax) amount

of $8,000. If you then choose to roll your DROP

distribution into a pre-tax eligible plan (taxed upon

taking a distribution), you will need to deposit the entire

gross (pre-tax) amount of $10,000 to avoid any income

tax. Any amount less than the gross (original) DROP

balance is considered taxable income in the year the

payment was made. Also, you may be subject to an

additional 10 percent tax for early distribution.

Depending on your annual tax return calculations, the

WHAT’S INSIDE

✓ General Rollover Information

Eligible Plans and Distributions

Payment Options

Tax Effects on Payment Options

Roth IRA

✓ Special Rules

After-Tax Contributions

Required Minimum Distribution

Born Prior to January 1936

Qualified Domestic Relations Orders

Nonresident Alien

✓ Beneficiary Information

Surviving Spouse

Other Beneficiaries

✓ Contact Information

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Internal Revenue Service (IRS) may refund you the 20

percent tax withholding.

Note: If you miss the 60-day rollover deadline, the IRS

may waive the deadline under certain extraordinary

circumstances, such as external events preventing you

from completing the rollover by the 60-day deadline. To

apply for a waiver, you must file a private letter ruling

request with the IRS, which includes a nonrefundable

user fee. For more information see IRS Publication

590, Individual Retirement Arrangements (IRAs).

Tax Effects on Payment Options

The FRS will withhold 0 percent withholding tax on direct

rollover elections unless you choose to roll it into an after-

tax eligible plan (Roth IRA – see below). For a lump sum

election, the FRS will withhold 20 percent withholding tax,

even if you choose to roll your lump sum payment into an

eligible plan within 60 days of the payment date.

In addition, if you are younger than age 59½, your FRS

payout is considered an ‘early distribution.’ This

means you are still responsible for the additional 10

percent early distribution penalty paid to the IRS. The

10 percent additional income tax penalty does not

apply to the following payments from the FRS:

• Payments made after you separate from service

if you will be at least age 55 when you separate;

• Payments made after you separate from service

if you are a public safety employee and you are

at least age 50 when you separate;

• Payments that start after you separate from

service if paid at least once a year in equal or

close to equal amounts over your life or life

expectancy (or the lives or joint life expectancy of

you and your beneficiary);

• Payments after your death;

• Payments made directly to the government to

satisfy a federal tax levy;

• Payments made under a Qualified Domestic

Relations Order (QDRO).

Rollover into a Roth IRA

You can roll over your FRS DROP or refund payment to

an after-tax Roth IRA (excluding designated Roth

accounts) and choose 0 percent (the default), 10

percent or 20 percent withholding tax on the DP-PAYT

Form. Early distribution penalties will not apply unless

you take the amount you rolled over out of the Roth

IRA within five years, starting from January 1 of the

year you made the rollover. If you roll over the payment

to a Roth IRA, later payments from the Roth IRA that

are qualified distributions will not be taxed (including

earnings after the rollover). A qualified distribution from

a Roth IRA is a payment made after age 59½ (or after

your death or disability, or as a qualified first-time

homebuyer distribution of up to $10,000) and after you

have had a Roth IRA for at least five years. This five-

year rule begins January 1 of the year for you first

contribute to a Roth IRA.

You do not have to take required minimum distributions

from a Roth IRA during your lifetime. For more

information see IRS Publication 590, Individual

Retirement Arrangements (IRAs).

SPECIAL RULES

After-Tax Contributions

Any after-tax employee contributions made to the FRS

Plan are not taxable and will be paid directly to you in

accordance with the IRS’ Simplified Method calculation.

For more information, see IRS Publication 575, Pension

and Annuity Income.

Required Minimum Distribution (RMD)

The FRS will calculate and pay your RMD mandated by

the IRS based on your age before terminating DROP

employment or becoming eligible for a refund of

contributions. If either of these events happened in 2019

or earlier, the FRS will pay your RMD if you were 70½ or

older. If the event happened in 2020 or later, the FRS

will pay your RMD if you were 72 or older. Your RMD

amount is your pre-taxed FRS payment minus the

required 10 percent federal withholding taxes.

Born on or before January 1, 1936

If you were born on or before January 1, 1936, and

receive a lump sum distribution that you do not roll

over, special rules for calculating the amount of the tax

on the payment might apply to you. For more

information see IRS Publication 575, Pension and

Annuity Income.

Payments under a Qualified Domestic

Relations Order (QDRO)

If you are the spouse or former spouse of a member

who receives a DROP payment from the FRS under a

QDRO, you generally have the same options the

member would have. For example, you may roll over

the payment to your own IRA or an eligible employer

plan that will accept it. Payments under the QDRO are

not subject to the 10 percent additional income tax on

early distribution.

Nonresident Alien

If you are a nonresident alien and do not select a direct

rollover of your FRS payment to a U.S. IRA or U.S.

employer plan, then instead of withholding the standard

20 percent, the FRS Plan is required to withhold 30

percent of the payment for withholding taxes. For more

information see IRS Publication 519, U.S. Tax Guide

for Aliens, and IRS Publication 515, Withholding of Tax

on Nonresident Aliens and Foreign Entities.

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BENEFICIARY INFORMATION

Payments to Surviving Spouse

For those receiving a payment from the FRS as the

surviving spouse of a deceased member, lump sum

elections and rollover elections will be taxed in the same

manner as described elsewhere in this notice. However,

10% additional income tax on early distributions and the

special rules for public safety officers do not apply and

the special rule described under the section ”If you were

born before January 1, 1936” applies only if the

deceased member was born on or before January 1,

1936.

If you choose to do a rollover to an IRA, you may treat

the IRA as your own or an inherited IRA.

An IRA you treat as your own is treated like any other

IRA of yours. Payments made to you from the IRA

before you are age 59½ will be subject to the 10

percent additional income tax on early distributions

(unless an exception applies) and the required

minimum distributions from the IRA will be based on

your date of birth, not the member’s. Note: A rollover

to a Roth IRA is treated like any other Roth IRA of

yours so that you will not have to receive any required

minimum distributions during your lifetime.

If you treat the IRA as an inherited IRA, payments from

the IRA will not be subject to the 10 percent additional

income tax on early distributions, but will be subject to

the required minimum distribution rules based on the

member’s date of birth.

Payments to Other Beneficiaries

For those receiving a payment from the FRS as a

designated beneficiary other than a surviving spouse of a

deceased member, the only rollover option you have is to

do a direct rollover to an inherited IRA. Payments from

the inherited IRA will not be subject to the 10% additional

income tax on early distributions and you will be subject

to the required minimum distribution rules.

If you choose not to roll over the distribution, the

amount will be taxed in the same manner described

elsewhere in this notice. However, the 10 percent

additional income tax on early distributions and the

special rules for public safety officers do not apply.

The special rule described under the section “If you

were born on or before January 1, 1936” applies only if

the member was born on or before January 1, 1936.

FOR MORE INFORMATION

Please contact a professional tax advisor before

electing a payment from the FRS.

You can find more information in the publications listed

below that are available at your local IRS office, on the

web at www.irs.gov or by calling 1-800-TAX-FORM

(829-3676).

• IRS Publication 575, Pension and Annuity Income

• IRS Publication 590, Individual Retirement

Arrangements (IRAs)

• IRS Publication 571, Tax-Sheltered Annuity Plans

(403(b) Plans)

Please visit our web site for additional information at:

www.frs.myflorida.com.

You can reach the division directly toll free at (844)

377-1888, or locally at (850) 907-6500.

You can also write to the division at:

Florida Department of Management Services

Division of Retirement

P.O. Box 9000

Tallahassee, FL 32315-9000

Special Tax Notice 2020

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