KCPSRS is designed to provide monthly benefits to qualified members. The benefits are financed through contributions made by the members and the employers. If you do not qualify for a current or future monthly benefit, or if you choose to take a lump sum payment instead of a monthly benefit, then you have the right to receive your employee contributions plus any earned interest on those contributions after you have experienced a 60 day “break in service.”
You cannot gain access to your contributions via loans or withdrawals while you are employed by a KCPSRS covered employer. Since membership in KCPSRS is a condition of employment, a distribution is available only if your employment has ended and you request a refund of contributions and earned interest.
If you think there is a chance you may go back to full-time work for the School District, Library, or Charter Schools you may want to leave your contributions in the Plan. Your assets will earn interest for up to 4 years, and if you go back to work for a KCPSRS covered employer the prior service will be counted towards your entitlement to receive a retirement benefit.
If you stop working for the KCPSRS covered employer before qualifying for a retirement benefit then you may terminate membership in the Retirement System and request a distribution of your contributions plus earned interest. Untaxed contributions and all interest earned are subject to taxation at the time of withdrawal unless the money is rolled directly into an IRA or a qualified retirement plan. Contributions left in your Retirement System account by non-vested members will earn interest for up to four years after termination of employment.
You have a right to withdraw your contributions and interest in a lump sum if you are no longer employed by any of the employers and you have not applied for a monthly benefit. All pretax contributions and interest earned are subject to taxation when withdrawn unless rolled directly to an IRA or a qualified retirement plan. Taking the lump sum payment eliminates your entitlement to any future retirement benefits.
The Retirement Office issues a Form 1099-R to every person who receives a distribution in a year. The form lists the amounts of the distribution and the tax withholdings for the year and should be used in filing your income tax return for the year of the distribution.
Lump sum payments look very attractive because, in many cases, they represent one of the largest sums of money you may ever accumulate. But bear in mind two things:
1) Although the lump sum may seem like a lot of money, you should compare it to the stream of monthly benefits you will not receive.
2) If you take a lump sum payment you will receive only your contributions and earned interest, and give up all rights to the employer contributions made to the plan on your behalf.