Tier 2 Refunds
If you resign, are discharged, dismissed, or laid-off from state employment, you may choose to withdraw your contributions or leave them in SERS. You must be off the payroll for 14 days to be eligible for a refund of your contributions.
Refunds are generally paid within 60-90 days from date of application. SERS must first confirm and certify with the employing agency that payrolls have cleared and employment has terminated.
If you choose to leave your contributions in SERS:
- You must have ten years of service under SERS to qualify for a pension.
- You may use less than ten years of service to qualify for a pension under the Retirement Systems’ Reciprocal Act. However, you must have at least one year of credited service to use reciprocity.
If you choose to have your contributions refunded:
- You will receive no interest on your contributions.
- You will forfeit all rights to benefits for yourself and your beneficiaries.
If you withdraw your contributions and later return to state employment:
- You will be eligible to repay your refunded contributions and have your previous service credit restored after you have completed two additional years of credited service. Credited service under the Retirement Systems’ Reciprocal Act can be used to meet this requirement.
When Refunds are Paid to You
- You pay no Illinois state income tax.
- You will pay federal tax on most benefits. Specific information will be furnished when benefits are payable.
- All benefits and refunds must be declared as income in the year in which they are received.
- You may postpone taxation of refunds by ‘rolling-over’ the taxable portion of the payment to another employer plan that accepts it, or to an Individual Retirement Account or Roth IRA. SERS is a qualified retirement plan under Section 401(a) of the Internal Revenue Code. Therefore, you will not be taxed on your contributions until you receive them. To inquire about a refund, call 217-785-7444.
The best tax treatment for you depends on your individual financial situation. Therefore, SERS advises all members to check with a qualified tax consultant before receiving benefits or refunds.