Cash balance pension plans are a form of pension that derives its value from a set percentage of the employee's wage each year, usually 5 percent, which is contributed by the employer on the employee's behalf. When employees reach retirement age, they can choose to take the amount in the account as a lump sum or can choose to receive a pension for the duration of their lives. Withdrawing money before that retirement date is only allowed under certain very specific conditions.
Consult your pension fund statement for the balance available in the fund and the contact information for the fund administrator, usually a department in the bank that manages the pension.
Contact the pension fund administrator at the bank and request a disbursement form for your cash balance pension fund. There are only a few allowable reasons to remove your money from the pension fund: termination of the fund by the company, severance of your employment with the company, disability and retirement.
Decide what to do with your money. You need to put this information on the disbursement form the bank provides. You can avoid fees and taxes by rolling it directly into another retirement fund, either an IRA or a 401(k). If you have a new employer, you can roll that money into your retirement or pension fund. If you choose not to roll it into a retirement account, you become liable for additional taxes on the money you take out.
Complete the disbursement form, listing the account number of the account into which you want to move the money. Sign and date the form, and return it to your bank.
Keep complete records of the transfer because you will need to document the change in account status on your taxes.
- Generally speaking, taking the pension as an annuity until you die provides you with a greater benefit than taking the lump sum and avoids some tax burdens.
- Consult with your accountant regarding tax liability, which can vary widely depending on how much money is in the pension plan and what kind of account into which you move the money.
Items you will need
- Pension fund statement
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