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RSP distributions

Since the objective of the Retirement Savings Plan is to provide a way to save money for retirement, tax laws limit when you may withdraw money from your account.

You may withdraw funds (without penalty) from your Retirement Savings Plan account only when you

  • retire (at age 55 or older);
  • reach age 59½;
  • become disabled;
  • enter military service;
  • terminate eligible employment; or
  • die.

In addition, for Roth earnings to be withdrawn tax-free, the withdrawal must satisfy the five-year Roth holding requirement.

To initiate a withdrawal from an RSP account, you (or your beneficiary) must call Fidelity at 800-343-0860 to speak with a customer service associate (reference plan # 57887). Access Fidelity TTY service at 800-259-9743 and a Spanish-speaking representative at 800-587-5282.

Tax treatment

Distributions of pretax salary deferrals and employer contributions and earnings associated with those amounts from the RSP are subject to income tax. Withdrawals taken before age 59½ may be subject to a 10 percent penalty tax, in addition to normal income tax. Roth salary deferrals and their earnings are not taxable at distribution as long as the withdrawal satisfies the five-year Roth holding requirement and you are age 59½ or older, die, or become disabled.

For specific advice based on personal circumstances, consult a qualified tax or financial adviser.

The Board annually designates entire RSP distributions, if used by ministers for housing, as “housing allowances,” subject to a cap at the fair rental value of the housing. Under Section 107 of the Internal Revenue Code, such distributions are not subject to federal income tax and may not be subject to state income tax.

If you are a minister, when you request an RSP distribution from Fidelity, it is important to state that you will use it for housing expenses by a minister and ask that the distribution be designated as housing allowance for income tax purposes.

Loans

A loan from the Retirement Savings Plan means that you are borrowing funds from your account that you will pay back to yourself with interest. You may borrow from your account balance up to the lesser of 50 percent of your vested account balance or $50,000, minus your highest loan balance in the past 12 months. Only one outstanding loan is permitted at a time.

You must repay a loan from the Retirement Savings Plan with interest within five years. If the loan will be used to buy a primary residence, the repayment period may extend to 15 years. Before you take a loan, it’s important to consider all the potential costs and ramifications of doing so, including loan fees and the loss of compound earnings on the outstanding loan amount.

Withdrawals

You may apply for a withdrawal from your RSP account in certain circumstances; federal tax laws govern these transactions.

Hardship Withdrawals

If you do not meet the criteria for withdrawing funds without a penalty (above), you may withdraw funds from your account only in cases of serious financial hardship.

The Board of Pensions is prohibited by law from permitting early withdrawals unless a participant can establish an immediate and significant financial need that cannot be met from any other source. The Board must review and approve your request for a hardship withdrawal before your funds can be distributed.

Hardship withdrawals are generally permitted for you to

  • purchase a primary residence;
  • repair damage to your primary residence (exempt from early withdrawal penalty and mandatory withholding, and taxable over a three-year period);
  • recover from economic loss as a result of a disaster declared by the Federal Emergency Management Agency (FEMA), provided your principal residence or principal place of employment at the time of the disaster was located in the area designated by FEMA for individual assistance;
  • cover expenses to prevent your eviction or foreclosure;
  • pay for funeral expenses for your deceased parent, spouse, child, dependent, or designated primary beneficiary;
  • pay for post-high school education expenses for you, your spouse, children, dependents, or designated primary beneficiary;
  • pay for up to $5,000 of expenses associated with the birth or adoption of a child, within a year of the event; or
  • cover unreimbursed healthcare expenses for you, your spouse, dependents, or designated primary beneficiary.

Other hardships of a participant will be considered by the Board. To satisfy a financial hardship, participants may withdraw only elective employee contributions.

Employer contributions and earnings on your account are not eligible for hardship withdrawals, unless you are a minister of the Word and Sacrament making the withdrawal for the purchase of a primary residence. This would be considered a manse equity withdrawal, for which you would apply directly to Fidelity.

Hardship withdrawals of pretax contributions and earnings from Roth funds are subject to income taxes and may be subject to a 10 percent penalty tax for early withdrawal. For specific advice based on your personal circumstances, you should consult a qualified tax or financial adviser.

Rollovers

A rollover distribution is a request to transfer funds in your RSP account to another qualified plan, such as a 403(b), 401(k), or an IRA. You also may roll over your plan account to a Roth IRA. A rollover is only allowed if you

  • retire (after age 55);
  • reach age 59½;
  • become disabled;
  • enter into the military;
  • terminate eligible employment; or
  • die.

Rollovers are governed by federal tax law:

  • The pretax portion of your rollover distribution is tax free if it moves directly from the RSP into a pretax account within the plan receiving your rollover.
  • Rollovers of Roth funds into the Roth portion of a qualified plan are also not subject to federal income tax.
  • A rollover of pretax funds into a designated Roth account within a 403(b), 401(k), or Roth IRA is subject to federal income tax. If you elect to roll over the pretax portion of your account to a Roth IRA, your account will be taxable in the year in which it is contributed to the Roth IRA. You may enter into a voluntary tax withholding agreement with Fidelity.

You will be responsible for recognizing and reporting applicable taxable income associated with a rollover into a Roth IRA.

Rollovers of fully or partially vested account balances are permitted.

In-service withdrawals

You cannot withdraw funds while still employed in eligible service unless you

  • have reached age 59½;
  • are eligible for a hardship withdrawal;
  • enter into military service; or
  • are a minister of the Word and Sacrament, withdrawing employer contributions to purchase a home.

Roth earnings may be withdrawn tax-free, provided the withdrawal satisfies the Roth five-year holding requirement, and you are at least age 59½, deceased, or disabled at the time of distribution.

Appeals

If you disagree with a Board of Pensions decision regarding the administration of your account, or your application for benefits is denied or reduced, you have the right to appeal that decision. The appeals process is described in the Retirement Savings Plan booklet.

Forms of Distribution

A distribution from your Retirement Savings Plan account can happen in one of several ways:

A single sum or partial payment paid directly to you: Generally, if you elect a single-sum payment or partial payment of your account balance, a 20 percent federal income tax withholding applies on (1) any pretax funds, and (2) any earnings on Roth funds that do not satisfy the five-year Roth holding requirement and the requirement that you are at least age 59½, deceased, or disabled at the time of distribution.

Rollover of your account balance to another 403(b), 401(k), certain pension plans, or a traditional or Roth IRA: If you perform a direct rollover of any portion of your RSP balance to a pretax account of another qualified plan or IRA, federal income tax is not withheld. If you perform a direct rollover of any RSP pretax funds or employer contributions into a Roth IRA, you may enter into a voluntary tax withholding agreement with Fidelity.

Systematic Withdrawal Plan: You may direct Fidelity to send you a set dollar amount every month. This continues until you direct Fidelity otherwise or your account has a zero balance. The 20 percent federal income tax withholding applies on (1) pretax funds, and (2) any earnings on Roth funds that do not satisfy the five-year Roth holding requirement and the requirement that you are at least age 59½, deceased, or disabled at the time of distribution.

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