Refund of Defined Benefit Plan Contributions
Defined Benefit Plan Refund of Contributions Fact Sheet
Eligibility for a Refund To be eligible for a refund of Defined Benefit Plan contributions,
one of the following criteria must be met: (1) you must be a former non-vested member (less than five
years of service) of the System, (2) you must be a beneficiary of a deceased vested member of the System
who was not eligible for retirement, (3) you must be a beneficiary of a deceased vested member of the System,
eligible for retirement with no spouse or (4) you must be a beneficiary of a deceased retiree or a designated
survivor whose contributions were not paid back in full through receipt of his/her monthly pension.
Payment Information
A notarized
Request for Refund of Defined Benefit Plan Contributions Form must be
completed and returned to the Retirement Office. Refund requests received by the 15th of the
month will be paid on the last working day of that month. Forms received after the 15th will be
paid on the last working day of the following month. All refunds are paid by check. (NOTE: Refund
requests will not be processed until the System receives official notification of the member's
separation from the City or a participating employer.)
Disbursement Options
You must elect to receive your refund by one of the following two options:
-
Lump-Sum Distribution paid to you
- Direct Rollover to a qualified plan
We recommend that you review the
Special Tax Notice Regarding Plan Payments on our
website and/or consult with a professional tax advisor prior to making your election.
Lump Sum Distribution
If you choose a lump-sum distribution paid to you, you will receive 80% of the taxable amount of the payment because the System is required to withhold 20%
of that amount and send it to the Internal Revenue Service (IRS) as income tax withholding to be credited against your taxes. An additional 4% may be withheld
to send to the Virginia Department of Taxation. If you receive the payment before age 59 1/2, you may have to pay an additional 10% to the IRS, upon filing your
federal tax return.
Direct Rollover
If you choose a direct rollover, your refund will not be taxed in the current year and no
income tax will be withheld. Your direct rollover must be to an eligible retirement plan as
defined in Section 401(a), 401(k), 403(b) or 457 of the IRS Code, a traditional individual retirement
account (IRA) or an individual retirement annuity.
Tax Reporting
Should your death occur prior to a refund being paid, your contribution account will be paid to your
designated beneficiary on file with the
Retirement Office. The designated beneficiary will have the same distribution options cited above.
Death of a Terminated Member
Should your death occur prior to a refund being paid, your contribution account will be paid to your
designated beneficiary on file with the Retirement Office. The designated beneficiary will have the same distribution options cited above.
No Named Beneficiary
In the event there is no named beneficiary(ies), the refund will be paid to the first person qualifying
based on the following order of precedence in accordance with the Code of the City of Richmond:
-
To a spouse;
-
If no surviving spouse, to the children and descendants of deceased children; per stirpes
-
If none of the above, to the parents equally or to the surviving parent;
-
If none of the above, to the duly appointed executor or administrator of the estate;
-
If none of the above, to other next of kin entitled under the law of the State of Virginia.