Members who terminate employment with the California
public school system may leave their contributions on deposit with CalSTRS,
or apply for a refund of their member contributions and accrued interest.
Termination of employment means action by the employee, such as submission
of a resignation; or action by the employer, such as dismissal or layoff.
Termination does not automatically occur at the end of the school year.
As an active contributing CalSTRS member you are eligible for substantial
benefit coverage, but if your contributions are refunded, you forfeit
your rights to any member benefits. Additionally, if you should decide
to reinstate to active status in the future, and redeposit previously
refunded contributions and interest, any unused sick leave that was accumulated
prior to your refund will not be included in your service
credit calculation when you apply for Service Retirement.
Upon your termination of employment you may choose from three alternatives:
- If you have less than five years of credited CalSTRS service and leave contributions on deposit:
- Your account will continue to accrue interest,
- You will not have to re-qualify for membership if you return to teaching;
- You may withdraw your contributions at any time if you are no longer teaching; but,
- You are not eligible for a retirement benefit unless you return to teaching or
qualify for concurrent retirement.
- If you have five years or more credited CalSTRS service and leave your contributions on deposit:
- Your account will continue to accrue interest,
- You will not have to re-qualify for membership if you return to teaching;
- You may withdraw your contributions at any time if you are no longer teaching; and,
- At age 55 you are eligible for a retirement benefit even if you never return to teaching.
- If you withdraw your contributions:
- You will receive contributions and interest credited to your account;
- Tax-deferred contributions and interest not rolled over to a qualified
retirement plan or IRA will be subject to IRS-required 20% federal withholding from your refund;
- Your refund will be subject to an additional IRS-imposed special 10%
penalty tax, and a State penalty tax of 2.5% on early lump sum distribution before age 59 1/2;
- You will no longer be a CalSTRS member and will not be eligible for any benefits;
- You may not redeposit the withdrawn contributions unless you re-qualify
for membership or are eligible for concurrent retirement, under certain conditions; and,
- You will have to perform one full year of creditable service before
becoming eligible for any benefits, even if you redeposit previously refunded contributions.
Member contributions plus credited interest will be refunded
in full upon request; partial refunds are not permitted. Previously taxed
and tax-deferred member contributions and interest earned are refundable,
but employer contributions are not credited to your individual account
and are not refundable as employer contributions are used to fund the
System. To request a refund of your account please submit a Refund Application,
Form RF 1360. This form is available from your school district office,
county office or through the CalSTRS automated system at (800) 228-5453.
How to Request a Refund of Your Contributions
If you wish to withdraw your member contributions plus
accrued interest, you must file a termination of employment notice with
each of your employers and a Refund Application, Form RF 1360, with each
of your former employers.
You should send the Refund Application, Form RF 1360,
to the superintendent of schools for the county where you last worked;
exceptions to this are contained within the instructions in application
form. Your employer will certify that you have formally terminated employment
and will forward the Refund Application to us. If you terminated employment
more than one year ago, you may submit the application directly to CalSTRS.
Refunds are processed in two phases: 1) the initial check
will be for contributions and interest posted to your account as of the
date the refund is processed, this check will be mailed within three weeks
from the date we receive your valid refund application; and, 2) a second
check will be issued in approximately four months for additional contributions
if your school district reports any contributions after the refund date.
Tax-deferred member contributions and accumulated interest
credited to your account are taxed upon withdrawal. The Internal Revenue
Service (IRS) requires that CalSTRS withhold 20% from your refund if you
do not roll the funds over to a qualified retirement plan or Individual
Retirement Arrangement (IRA). In addition, the Internal Revenue Code imposes
a special penalty tax on early distributions, such as a lump sum distribution,
received before the plan participant reaches age 59½. The special penalty
tax of 10% of the taxable portion of the distribution is applied in addition
to the regular income tax. A State penalty tax of 2.5% on early lump sum
distributions will also be due.
We recommend that you consult a qualified tax
professional for advice on how to proceed. Also, topic 703 under Quick Topics
discusses how to defer federal taxes on
your refund by rolling over the funds into another tax-deferred
program. Any member contributions paid with previously taxed
income are not taxed when refunded, nor are these funds eligible
for rollover. To request a refund of your contributions and
accumulated interest please submit a Refund Application, form
RF 1360. This form is available from your school district
office, county office or through the CalSTRS automated system
at (800) 228-5453. Teachers Retirement law requires a member's
spouse or registered domestic partner to sign the refund application.
Please request Teletalk message number 108 for information
on spousal acknowledgement requirements.
Refund Rollovers
A rollover is a tax-free transfer of an eligible distribution
from one qualified employer retirement plan directly to another
qualified plan or Individual Retirement Account (IRA).
The federal income tax withholding rate of 20% applies to eligible
distributions made from a qualified retirement plan, such as CalSTRS.
This tax shall be withheld on any eligible distribution if it is not
rolled over directly into another qualified plan or IRA.
An eligible CalSTRS distribution would be a lump sum death payment
and/or the tax-deferred contributions and interest included in a refund
or return of the accumulated contributions in the member’s CalSTRS account.
A payee may elect to receive the eligible distribution directly and roll
it over on their own within 60 days; however, CalSTRS must deduct the
mandatory 20% withholding before the distribution is issued, thus
the payee will receive only 80% of the distribution.
To request a refund of your contributions and accumulated interest,
please submit a CalSTRS Refund Application form. When applying
for an eligible distribution the payee must indicate on the application
whether or not the distribution is to be rolled over. For more information
about refund rollovers, please see the CalSTRS publication Tax
Considerations for Rollovers. You may view and print forms or
publications, or request they be mailed to you, by clicking on “Forms &
Publications” at CalSTRS.com.
This message summarizes Internal Revenue Code rollover rules and is
not intended as tax advice. To determine how Internal Revenue Code rollover
rules apply to your situation, we suggest that you consult a qualified tax
professional for advice.
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