Accessing Your Plan Money
Retirement plans are meant to provide you with income in your retirement years. Generally, this means that you should take money out of your plan only when you’re officially retired. There may be times, however, when you need to access your savings before then – for example, to buy a house or pay college tuition. Retirement plans are regulated by the federal government, so there are specific rules pertaining to when you can access your retirement plan money.
ON THIS PAGE:
- Accessing Your Money While Employed at Penn
- Hardship Withdrawals
- Accessing Your Money After Separating from Penn
- Required Minimum Distributions at Age 70 ½
Here are the options for accessing your money:
|In-service withdrawal||Hardship withdrawal||Disability withdrawal||Loan|
|SRA - age 59 ½
Basic/Matching - age 70 ½
|SRA only||All plans||SRA at TIAA|
|Once you reach the ages above, you become eligible to take withdrawals from the plans.||Contact the provider from whom you wish to take a withdrawal:
TIAA 877-736-6738 Vanguard 800-523-1188
|Available to employees who are on Penn's Long Term Disability, or who have been declared by Social Security as permanently disabled.||To initiate a loan from an SRA account at either provider, call the Retirement Call Center at 877 PENN-RET (877-736-6738).|
Be sure to ask for the correct withdrawal type (or loan). Each type has its own forms and process; so if the withdrawal type is incorrect, your request will need to be declined and you'll need to submit a new request.
Changes to loan policy effective January 1, 2019
- Loans may be taken by active employees only.
- A maximum of two loans may be outstanding at a time.
- If a defaulted loan is outstanding, another loan may not be taken until the defaulted loan is cured.
These changes do not affect loans taken before January 1, 2019.
Loans are available from the SRA Plan, and are issued by TIAA only. If you want to borrow from your SRA Plan account at Vanguard, you’ll need to transfer the necessary amount to TIAA (to initiate a transfer for the purpose of taking a loan, please contact TIAA at 877-736-6738). TIAA will tell you about your options for repaying the loan. A loan from the SRA Plan is a binding obligation. You are required to repay it.
Effects of a Loan on Your Retirement Savings
When you take a loan from the SRA Plan, you borrow money from your account and then repay it to your account with interest. There are two drawbacks that you should understand before taking a loan:
- Decreased opportunity for long-term growth – When you take a loan, the loan balance doesn’t benefit from investment experience while it’s out of your account.That can significantly reduce the amount of money you accumulate for retirement.
- Double taxation – You repay your loan with money on which you’ve already been taxed, but regulations require it go into your account in its original pre-tax form.When you eventually take a taxable distribution from the Plan, that money will be taxed again.
Defaulting on a Loan
If you fail to repay the loan according to the repayment terms, the loan will be in default. If the loan isn’t repaid in full [by the end of the quarter following the default], the unpaid amount of the loan will be deemed a distribution and will be reported as taxable income in the year of the default (you will also incur the IRS’ 10% early withdrawal penalty if you’re under age 59 ½). This deemed distribution, however, does not relieve you of your obligation to repay the loan. A plan loan is not intended to be a distribution, and regulations require that it must be repaid.
Rules regarding hardship withdrawals are established by the IRS. Although Penn approves hardship withdrawals for plan compliance purposes, you are responsible for deciding whether your situation is sufficiently serious to warrant an application to withdraw retirement funds. We recommend that you obtain advice from your legal and/or tax advisor in making this determination.
IRS rules state that hardship withdrawals can be taken only for immediate and heavy financial need. All other reasonably available financial resources must be exhausted first.
Hardship withdrawals are available from the Supplemental Retirement Annuity Plan (SRA) only. Your contributions, but not the earnings on those contributions, are eligible for a hardship withdrawal. If you qualify for a hardship withdrawal, you may withdraw up to the amount stated on the required documentation (see chart in Immediate and Heavy Financial Need section).
Immediate and Heavy Financial Need
To satisfy the IRS’ “immediate and heavy financial need” requirement, the distribution must be for:
Medical expenses for the employee or the employee’s spouse, children or dependents, or primary beneficiary under the plan
Copy of bill from healthcare provider, dated within 60 days of submission (medical or diagnostic information is NOT required and should not be submitted)
|Costs directly related to the purchase of a principal residence||Contract of sale, good faith estimate, estimate of construction costs, etc.|
|Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure of the mortgage on that residence||Mortgage collection letter, eviction notice, etc., that clearly states that non-payment will result in foreclosure or eviction, as well as the amount required to prevent the foreclosure or eviction|
|Payment of tuition, related educational fees, room and board expenses for the next 12 months of post-secondary education for the employee or the employee’s spouse, children or dependents, or primary beneficiary under the plan; (books, transportation, and club fees are not covered)||Tuition bill|
|Payments for burial or funeral expenses for the employee’s deceased parents, spouse, children or dependents, or primary beneficiary under the plan||Bill from funeral home, cemetery, religious institution, etc.|
|Expenses for the repair of damages to the employee’s principal residence that would qualify for the casualty deduction under section 165||Statement of the cause of the damage and estimate of repair cost|
Here is a printable guide for substantiation of hardship withdrawals.
Reasonably Available Financial Resources
Before taking a hardship distribution, IRS rules require that you first exhaust all other reasonably available financial resources, including:
- Reimbursement or compensation by insurance or other agency.
- Reasonable liquidation of your assets, to the extent that such liquidation would not itself cause an immediate and heavy financial need.
- The funds you would normally contribute to the retirement plans.
- Borrowing from commercial sources on reasonable commercial terms in an amount sufficient to satisfy the need.
- Other available distributions from the retirement plans.
Taxation and Penalties
Hardship distributions are taxable as income. If you are under age 59½ at the time of the withdrawal, you may also be subject to a 10% early withdrawal penalty by the IRS. If you have sufficient funds in your account, you can elect to have an additional amount withheld to cover the applicable taxes.
Hardship withdrawals are subject to very specific IRS rules. They must be carefully followed in order to avoid IRS sanctions against both Penn and the employee. Therefore, no application for a hardship withdrawal will be approved without the appropriate support documentation.
TIAA Interest Payment Retirement Option at Age 55
If you are age 55 or older, you may elect to begin receiving income under the TIAA Interest Payment Retirement Option (IPRO). For more information, please contact the Retirement Call Center at 877-PENN-RET (877-736-6738).
Once your active employment at Penn has ended, you may take a distribution from the retirement plans at any time (subject to any restrictions on your investment funds at TIAA and Vanguard – you would have agreed to such restrictions before choosing these funds).
One you leave Penn, your options for the retirement plan are:
- roll your money over to another employer plan, or to an IRA
- leave your money in Penn’s plan
- cash it out
The first two options, rolling it over or keeping it in Penn’s plan, won’t trigger a taxable event. Rolling it over allows you to consolidate your retirement savings. Some people, however, decide to leave their money in their former employer’s plan because the investment options or other plan features better suit their investment goals.
The third option, cashing out your account, is a significant financial setback. Cashouts are taxable as income; if you’re under age 59 ½, the IRS will also typically impose a 10% early withdrawal penalty. Unless you are cashing out your account for planned retirement income, we suggest meeting with a financial counselor from TIAA or Vanguard to discuss the long-term impact of the cashout.
|Rollover Distribution||Separation from Service Distribution (cashout)||Disability withdrawal||Loan|
|All plans||All plans||SRA at TIAA|
To another employer plan (if the plan accepts rollovers), or to an IRA
consolidates retirement investments
if under 59 ½ years of age, the IRS will typically impose a 10% early withdrawal penalty
significantly erodes your retirement savings if taken early
If you’re under 59 ½ and are declared permanently disabled by Social Security, taking a Disability Withdrawal will help you avoid the IRS 10% early withdrawal penalty (please ask a tax advisor about your specific situation)
Serviced by TIAA only
Participants with a balance at Vanguard can take a loan by transferring the necessary amount to TIAA. Contact TIAA for more information
Significantly erodes your retirement savings
Loans must be paid back to the SRA Plan according to the terms of the loan.
Contact the provider from whom you wish to take a withdrawal:
To initiate a loan from an SRA account at either provider, call the Retirement Call Center at 877 PENN-RET (877-736-6738).
IRS rules state that you generally cannot defer payment beyond April 1 of the calendar year following the year in which you reach age 70 ½, or the year you terminate employment with Penn, whichever is later. Once you reach this point, the IRS requires that you take a minimum distribution each year. TIAA and Vanguard administer these Required Minimum Distributions, and they will notify you of the amount you need to take each year. For more information, please contact TIAA at 877-736-6738, or Vanguard at 800-523-1188.
The payment of your account in the event of your death is determined by several factors, including whether payment had already begun, whether you have a spouse/partner, and if there is a named beneficiary (see Designating Your Beneficiaries for more information). For more information about payment options, please see the Summary Plan Descriptions.
Retirement Call Center