Considering a career change? If you no longer work in a CalSTRS-covered position, you can leave your money in CalSTRS until you reach 70½ or request a refund.
If you have fewer than five years of service credit and do not plan to return to teaching, and you are not eligible for concurrent retirement with another California public retirement system, you may wish to consider a refund. Otherwise, carefully consider the consequences of taking a refund.
Benefits of leaving your contributions with CalSTRS:
- You’ll keep your service credit.
- Your accounts will continue to accrue interest.
- You’ll be eligible for a monthly retirement benefit when you are age 55 with at least five years of service credit.
Consequences of receiving a refund:
- You’ll no longer be a CalSTRS member.
- You’ll cancel your eligibility for your CalSTRS retirement benefit, as well as survivor and disability benefits, unless you return to CalSTRS-covered employment.
- Any option beneficiary or one-time death benefit designation will be canceled. If you return to CalSTRS membership and later retire, an assessment may be calculated at retirement for the preretirement election of an option you previously made. The assessment will reduce your lifetime monthly retirement benefit.
- You must receive the total balance of your Defined Benefit Supplement account as a termination benefit. You cannot buy back this distribution.
- Your refund and termination benefit may be taxed as income unless they are rolled over into a qualified retirement account. CalSTRS is required to withhold 20 percent federal income tax on all payments distributed directly to you. If you choose to have state income tax withheld, CalSTRS will withhold 2 percent. You may have to pay additional federal and state taxes if you take your refund before age 59½ and do not roll over your funds to a qualified retirement plan.
- You may not redeposit your Defined Benefit contributions unless you re-qualify for CalSTRS membership or are a member of certain other California public retirement systems.
- If you expect to receive a Social Security check through your spouse or other employment, your Social Security benefit still will be offset by the Windfall Elimination Provision and the Government Pension Offset.
If you return to membership after taking a refund and later redeposit contributions and interest:
- Your membership date will change to your return date for determining your years of service credit for your retirement benefit calculation.
- You will be covered under Coverage B for survivor and disability benefits even if you previously had Coverage A.
- You must earn one year of service credit since your last refund and have at least five years of service credit before being eligible for CalSTRS retirement benefits.
- You must buy back, or redeposit, the service credit previously refunded to you if you wish to receive full retirement benefits from your past CalSTRS membership.
- You will be under the CalSTRS 2% at 60 benefit structure if you were first hired to perform CalSTRS creditable activities before January 1, 2013.
To learn more, watch Refund: Consider the Consequences.
When you terminate your CalSTRS-covered position, you can request a refund of your Defined Benefit account contributions and your Defined Benefit Supplement account balance, including interest earned.
After your employer verifies your separation and CalSTRS receives your Refund Application, we will refund your Defined Benefit contributions, including tax-deferred member contributions under the Employer Pick-Up Program, plus the interest credited on your contributions, as well as your Defined Benefit Supplement account balance.
Partial refunds are not allowed. In addition, employer and state contributions to your Defined Benefit account are not refundable. Employers’ contributions that are credited to your Defined Benefit Supplement account, however, are refundable.
See the Refund: Consider the Consequences fact sheet for more information.
To request a refund, you must submit:
- Termination of employment notice with each of your employers, and
- Refund Application with each of your former employers.
Instructions on how to submit your Refund Application are included with the application.
Refunds are processed in two phases:
- You can typically expect to receive a check for your Defined Benefit account balance within 30 days from the date CalSTRS receives your completed application. However, payment timeframes can vary. Contact CalSTRS for the most current timeframes.
- If your employer reports any contributions after the refund date, we will mail you a second check approximately four months later.
Tax-deferred member contributions and accumulated interest credited to your account are taxed upon withdrawal. The IRS requires CalSTRS to withhold 20 percent from your refund if you do not roll over your funds to a qualified retirement plan or IRA.
Additionally, the Internal Revenue Code imposes a special penalty tax on early distributions, such as a lump-sum distribution, before you reach age 59½. Your refund may be subject to a federal special penalty tax of 10 percent of the taxable portion of the distribution in addition to the regular federal income tax and a state penalty tax of 2.5 percent in addition to the regular state income tax.
Before you request a refund, we recommend that you consult a qualified tax professional. You may also see Tax Considerations for Rollovers for more information.
Member contributions paid with previously taxed income are not taxed when refunded.
Teachers’ Retirement Law requires your spouse’s signature on your Refund Application. If your spouse does not sign your application, or you do not provide the Justification for Non-Signature of Spouse or Registered Domestic Partner form with your application, your application and certified or endorsed copies of the validating documents will be held for up to 90 days pending receipt of your Justification for Non-Signature form. Under state law, if CalSTRS does not receive your justification form within 90 days, your application for a refund will be canceled.
Redepositing allows you to restore any service credit lost if you took a refund of your contributions. If you return to teaching or other CalSTRS-covered employment, or if you are a member of another California public retirement system, you may restore past Defined Benefit refunded service credit by redepositing your refunded contributions plus interest.
You may choose to restore a portion, rather than all, of the service credit you lost when you took a refund. The more time between your refund and redeposit, the higher the cost to redeposit.
You may not redeposit refunded Defined Benefit Supplement contributions and interest.
Before you are eligible for CalSTRS benefits, you must have earned at least one year of service credit after you received the most recent refund of accumulated retirement contributions and have at least five years of service credit, unless you are retiring concurrently with another California public retirement system.
Your redeposit purchase must be paid in full before your retirement date.
Redepositing does not re-establish your earlier membership date or benefits that may have been available to you before you received a refund. An exception: You will not be subject to the Pension Reform Act of 2013 if you were first hired to perform CalSTRS creditable activities before January 1, 2013. You will remain a member under the CalSTRS 2% at 60 benefit structure.
In some community property settlements, your service credit, contributions and interest are divided to create a separate account for your former spouse or registered domestic partner. If your former spouse or partner takes a refund of his or her account, you can choose to restore all or a portion of the service credit awarded to your former spouse or partner. However, you may not redeposit the Defined Benefit Supplement contributions and interest refunded by your former spouse or partner.
Cost to redeposit
The cost to redeposit and the benefits you will receive from restoring service credit will vary depending on your individual situation.
For example, a teacher who withdrew $10,000 (representing three years of service credit) in May 1993 and wanted to purchase those years of credit in May 2012 would be required to redeposit $31,799.
Former Local Service members
If you have Local Service credit listed on your Retirement Progress Report, it will not be fully funded. You will receive up to $2.40 per year of Local Service credit toward your retirement benefit. To fully fund this service, contact CalSTRS.
If you are a CalSTRS member and change to employment covered under another public retirement system such as the California Public Employees’ Retirement System, you can continue your existing CalSTRS coverage or change to that other system.
For example, you may move from a job as a classroom teacher to a position as a human resources specialist in the district office, a position usually under CalPERS. Likewise, a human resources specialist may decide to take a teaching position, a position usually under CalSTRS.
The two systems are treated differently for Social Security coverage.
CalSTRS members do not participate in Social Security, but CalPERS members do. Contact the Social Security Administration at 800-772-1213 to determine how an employment change would affect any Social Security benefit due to you.