Texa$aver Distributions for Retirees
Distribution options upon leaving state employment
You can start taking distributions after separation from state or higher education employment. You may roll over funds into other types of employer-sponsored plans, IRAs, or other eligible options. Lump-sum distributions have 20% automatically withheld for federal taxes. Periodic distributions are allowed.
Your distribution options are:
- Periodic payments;
- Partial distributions;
- Leave the money in Texa$aver, though you must start taking distributions once you reach age 70½ (see Required Minimum Distribution Rules);
- Roll over the balance or part of the balance to another qualified plan or an IRA; or
- Take all of the money in cash, called a lump-sum distribution.
You can initiate a distribution from Texa$aver after you retire or terminate employment by submitting a distribution form. You can download and print a Distribution/Direct Rollover Request form.
You are encouraged to talk with your tax advisor or financial planner before deciding to take your distribution.
If you do not elect a distribution method, your account will automatically stay in Texa$aver.
Required Minimum Distribution Rules
When you turn age 70½ and are retired, the law mandates that you begin to take a required minimum distribution (RMD) from your Texa$aver 401(k) and/or 457 Plan(s). If you have an account balance in both plans, you will need to complete a separate RMD form for each. The RMD is calculated separately for each plan using your account balance as of the last day of the previous year.
If you have turned 70½ in the calendar year, you will have until April 1 in the following calendar year to take your RMD for the current tax year. If you wait until January 1, you will need to take another RMD by December 31 of that year and will be taxed on both in that year.
If you are still employed and have already begun taking your RMD, you may choose to stop receiving distributions until you retire. If you are receiving installment payments, the Texa$aver administrator will continue these payments unless you notify them in writing to discontinue them.
If you have retired and do not take the RMD in a given year, you will have a penalty of 50% of the amount that should have been distributed.
Due to the RMD law complexity, you are encouraged to consult with your own tax advisor or the IRS to discuss the best way to comply with the rules based on your individual financial needs.
When you are ready to set up or receive your annual RMD, please contact a Texa$aver Customer Service Representative and request that an RMD form be mailed to you.