Refund of Contributions Upon Separation

If you leave Massachusetts public service before you can retire, you can leave your contributions in the retirement system or take them back as a refund. A refund ends your membership and is not easy to reverse. Read "Before you take a refund" first.

The rules are in MGL Chapter 32 § 11 and § 10.

Before you take a refund

• A refund ends your membership in the system.
• You give up any retirement allowance for the service you refund, even if you have 10 or more years.
• It can be reversed only by paying it back. If you return to public service later, you can restore the refunded service by paying back what you took out, plus interest. See Service Purchase and Makeup Payments.
• Interest stops counting two years after the end of the month before you leave. See "Interest on your refund" below.

If you have 10 or more years of creditable service, ask the board for an estimate of your future allowance before you decide.

What you receive

A refund pays your accumulated total deductions: the contributions you made from your pay, plus regular interest. It is paid in one sum.

The board pays the refund within 60 days after it receives your written request on the required form.

Interest on your refund

How much interest you receive depends on your service and when you joined.

• 10 or more years of creditable service: you receive full regular interest.
• Fewer than 10 years, and you joined after January 1, 1984, and you leave by your own choice: interest is figured at 3%.
• Anyone else: you receive full regular interest.

Interest stops after two years. Your account keeps earning interest, but your refund includes interest only up to two years after the end of the month before you left service. Interest for any time after that is not paid to you, even if you wait longer.

If you have not asked for your refund by then, the board writes to tell you your balance that interest has stopped counting, and what rights you may have to a later allowance.

If you have 10 or more years

In Groups 1, 2 and 4, with 10 or more years of creditable service, you can leave your contributions in the system and apply for a retirement allowance later. The age you can start depends on when you joined and your group. If you are in Group 3, ask the board. The board can tell you your age and estimate the amount.

If you have fewer than 10 years

Ordinarily you have no right to a future allowance from this service. Ask the board if you think another rule applies. A refund is the way to receive your contributions.

Checks before the board pays

Before it pays a refund, the board checks two things:

• Child support. If you owe child support arrears, the board withholds that amount and sends it to the state agency. An appeal of the levy pauses the payment.
• Employer obligations. If you owe your employer under an employee benefit plan, the board waits until the employer says the debt is paid.

Either one can hold or reduce your payment.

Taxes

You can ask for your refund to be paid to you or rolled over to another eligible retirement account that accepts the rollover.

The board gives you an IRS Special Tax Notice with your refund application. The refund form and the notice cover how pre-tax and post-tax contributions are treated for rollovers and direct payments. Read both before you choose.

For advice about your own taxes, talk to a tax professional.

How to take a refund

1. Leave public service. You can ask for a refund on or after the date your service ends.
2. Submit the refund application. The board gives you the required form and the IRS Special Tax Notice.
3. Choose how to be paid: directly to you or as a rollover.
4. Receive the refund. The board pays within 60 days after it receives your request, once the checks above are done.

If you never ask

If you have no right to a future allowance, your service ended at least 10 years ago, and you never took your refund, the balance moves to the system's Pension Reserve Fund. You can still claim it at any time.

Coming back later

If you return to public service, you can restore the refunded service. You pay back what you withdrew plus buyback interest.

Pay within one year of returning to get buyback interest. After that, a higher interest rate applies. See Service Purchase and Makeup Payments.