Employers' Pensions and Benefits Administration Manual (EPBAM)
   

 

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Supplemental Annuity Collective Trust
of New Jersey Regular After Tax Plan
(SACT - SA) — Distribution


   
 
Major Areas of Discussion About SACT - Regular
 
 

Eligibility

 
   
   
 
Distribution (present page)
 

Filing for Distribution

At Termination of Employment

Death Benefits

At Retirement:


Filing For Distribution

Termination of Employment

If a member terminates employment and withdraws all contributions from the basic retirement system, withdrawal must also must be made from the Trust account as a lump-sum settlement. Any investment gains on a SACT Regular account are eligible for tax-free rollover to an IRA.

To withdraw from the Trust, the member must file a Trust Application for Withdrawal with the Division of Pensions and Benefits, SACT Section.

The withdrawal value of any account is determined as of the close of the month in which the employee ceases to be a member of the basic retirement system; the month a withdrawal check from the basic system is dated.

FILING A WITHDRAWAL APPLICATION WITH THE BASIC RETIREMENT SYSTEM WILL NOT ALSO WITHDRAW A SACT TRUST ACCOUNT. THERE IS A DIFFERENT AND SEPARATE FORM FOR SACT.

Death Benefits

The member should always inform the beneficiary or family to notify the Division of Pensions and Benefits, SACT Section immediately in the event of their death.

Any time there is a change in family status (marriage, divorce, death, birth, etc.) a member should complete a new "Designation of Beneficiary" form to reflect those changes for any death benefits that may be payable.  Once received at the Division of Pensions and Benefits, properly completed beneficiary designations supersede all prior designations in the member's file.  

If a member dies before retirement, the named beneficiary(ies) will receive a lump-sum payment equal to the value of the account at the time of death or, if the beneficiary is a person (as opposed to an institution or charity), he or she may elect to receive a variable annuity under one of the distribution options of the plan.

If a member dies before retirement, the named beneficiary(ies) will receive a lump-sum payment equal to the value of the account at the time of death or, if the beneficiary is a person (as opposed to an institution or charity), he or she may elect to receive a variable annuity under one of the distribution options of the plan.

If the named beneficiary does not apply for benefits within 90 days of notifying the Division of Pensions and Benefits of  death, the account is placed in suspense. For questions concerning an account in suspense, call the SACT office at (609) 633-2031.

Retirement

Overview

A member must take distribution of the SACT account at the time of his/her retirement from the basic retirement system.

It is the member's responsibility to notify the Division of Pensions and Benefits, SACT Section, of his/her retirement at least 30 days in advance of the effective date of retirement, by filing the Application for Settlement at Retirement form. Members choosing the Lump Sum Settlement option must also fill in and complete the SACT Distribution Form. (For an explanation of each of the available options at retirement, see Distribution Options below.)

It is very important that the member notify the Trust without delay because the account ceases to participate in the plan’s earnings and losses and does not earn interest after the last day of the month in which the member retires. 

Should a member fail to file the appropriate distribution forms within the prescribed time, the account will be processed for payment under a Monthly Variable Life Annuity (no beneficiary). This payment option is irrevocable under Chapter 8 of the New Jersey Administrative Code.

Upon retirement, the Division of Pensions and Benefits, SACT Section will provide a quotation of the Trust account value detailing all distribution options.

FILING A RETIREMENT APPLICATION WITH THE BASIC RETIREMENT SYSTEM IS NOT SUFFICIENT NOTIFICATION OF YOUR RETIREMENT FROM THE TRUST. THERE IS A DIFFERENT AND SEPARATE FORM FOR THE TRUST.

LIKEWISE, THE RETIREMENT BENEFIT A MEMBER RECEIVES FROM THE TRUST IS SEPARATE FROM THE RETIREMENT ALLOWANCE RECEIVED FROM THE BASIC RETIREMENT SYSTEM.

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Distribution Options

Upon retirement, the Division will provide a quotation of the value of the member's account. This quotation will also detail the distribution options. The options are:
  1. A MONTHLY VARIABLE ANNUITY BENEFIT for the remainder of the member's life will be paid unless, prior to retirement, the member filed a "Trust Application for Settlement at Retirement" (available only from the SACT Section at the Division) selecting one of the alternative methods of payment as listed below. There are no provisions for a beneficiary under this option.

  2. A LUMP-SUM SETTLEMENT OPTION for the value of the account at the close of the month of retirement. Any investment gains on the SACT Regular account are eligible for tax-free rollover to an IRA.
  3. If there is no rollover into a qualified IRA, the taxable portion of the distribution will be subject to federal tax and the Division of Pensions and Benefits will withhold 20% as required by the IRS.

  4. A 5-YEAR ANNUITY CERTAIN AND LIFE THEREAFTER OPTION provides the member with a lesser monthly annuity benefit than Option 1. The annuity is paid for as long as the member lives.  However, if the member dies within the first five years of retirement, the named beneficiary will be paid the monthly annuity benefit until the end of the 5-year period.


  5. A 10-YEAR CERTAIN AND LIFE THEREAFTER OPTION provides the member with a lesser monthly annuity benefit than Option 1. The annuity is paid for as long as the member lives. However, if the member dies within the first 10 years of retirement, the named beneficiary will be paid the monthly annuity benefit until the end of the 10-year period.


  6. BENEFICIARY TO RECEIVE AN EQUAL BENEFIT OPTION provides the member with a lesser monthly annuity benefit than Option 1. The annuity is paid for as long as the member lives. However, upon the member's death, the named beneficiary will receive the same monthly annuity for his or her lifetime. Under this option, the named beneficiary may not changed after retirement.


  7. BENEFICIARY TO RECEIVE ONE-HALF BENEFIT OPTION provides the member with a lesser monthly annuity benefit than Option 1. The annuity is paid for as long as the member lives. However, upon the member's death, the named beneficiary will receive one-half of the member's monthly annuity for his or her lifetime. Under this option, the named beneficiary may not be changed after retirement.

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Account Valuations

The Trust is a variable annuity plan that is comprised of common stocks, cash management units and equity investments. The value of a Trust account will vary according to market value, the income and mortality experience of the plan. A quotation of retirement benefits will be calculated based on the latest unit values of the underlying securities in the plan portfolio. This is the date that an account ceases to participate in the earnings and/or losses of the plan.

A quotation letter will reflect the estimated value of an account and the amounts a member may receive as a monthly life annuity under the available options.

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Distribution Date

When the Division of Pensions and Benefits, SACT Section has received a Trust retirement or withdrawal application, a copy of the retirement or withdrawal application from the basic retirement system, and all other required information, the account will be processed for payment. 

Chapter 42, PL 1993 allows retiring members of PERS and the TPAF to use their SACT accumulations to offset any outstanding loans against their regular pension accounts that may be outstanding prior to retirement. To do so, a member must file an application with the SACT council within a 60-day period ending 30 days prior to retirement. Providing final approval has been given, lump-sum settlements are usually mailed within 30 days of the calculation of month-end unit values. Monthly annuity checks are mailed the first of the month following final approval of a member's retirement application.

Direct deposit of monthly annuity checks can be arranged by filing the appropriate forms with the Division.

Income Tax Information

All settlement check stubs detail information necessary for filing income tax returns. In addition, at the end of the year in which a member receives distribution, the Division of Pensions and Benefits will issue Form 1099R to those who received lump-sum distributions and W2-Ps to those who selected and are receiving monthly annuity checks.

Earnings from lump-sum distributions are eligible for rollover to an Individual Retirement Account (IRA). Eligible rollovers must be completed within 60 days of the date on the distribution check.

Early Retirement

If a member files for Early Retirement from the basic retirement system, an application must also be filed for early retirement from the Trust. If the member elects to receive a lump-sum distribution from the Trust, it may be subject to an IRS penalty of 10 percent if the qualified amount is not "rolled over" to a qualified IRA account.

Deferred Retirement

If a member files for Deferred Retirement under the basic retirement system, the Trust account must be deferred as well. During the period that an account is deferred, it will continue to participate in the earnings and/or losses of the underlying investment portfolio. The account valuation date will be the end of the month in which the member's deferred retirement from the basic retirement system becomes effective.

Once the member has terminated employment in anticipation of a deferred retirement, no further contributions are permitted to SACT-SA.

Please refer to the Supplemental Annuity Collective Trust (SACT) Member Handbook if you have additional questions about any aspect of the SACT program.

 

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Last Updated: May 4, 2007