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Supplemental Annuity Collective Trust
of New Jersey (SACT)
Tax-Sheltered (Pre-tax) Plan

Supplemental Annuity Collective Trust (SACT) Member Handbook


 
Major Areas of Discussion About SACT Tax-Sheltered
 
 

Eligibility

 
 

Orientation

 
 

Enrollment

 
 

Changes

 
 

Distribution (present page)

 

 


Filing For Distribution

    When Terminating Employment    
    Death Benefits    
    When Retiring:    
    Distribution Options    
    Account Valuations    
    Distribution Date    
    Income Tax Issues    
    Early Retirement    
    Deferred Retirement    

Upon Termination of Employment

If a member terminates employment and withdraws all contributions from the basic retirement system, the member must also withdraw all monies in the SACT Trust account as a lump-sum settlement.  

If a member has a SACT-TSA account, it is eligible for tax-free rollover to an IRA.

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

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

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

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Death Benefits           

The member should tell the designated beneficiary or family to notify the Division of Pensions and Benefits, SACT Section immediately upon 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.  

NOTE:  If a member has completed a Designation of Beneficiary form for the "basic retirement system " (PERS, TPAF, etc.), a form specific to SACT must also be completed.  If one is not completed for an existing SACT account, recent changes in family status will NOT be reflected in payment of SACT death benefits.

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

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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, in writing of the intention to retire 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 important that the member notify the Trust without delay because an 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 they retire. 

Should the 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 (with no beneficiary). This is irrevocable under Chapter 8 of the New Jersey Administrative Code.

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

FILING A RETIREMENT APPLICATION WITH THE BASIC RETIREMENT SYSTEM IS NOT SUFFICIENT NOTIFICATION OF RETIREMENT FROM THE TRUST. THERE IS A DIFFERENT AND SEPARATE PROCESS 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 the member with a quotation of the value of the account. The quotation will outline 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 Bureau at the Division of Pensions and Benefits) 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 the member's retirement.

    The SACT-TSA account is eligible for tax-free rollover to an IRA. 

    If there is no rollover into a qualified IRA, the distribution will be subject to federal tax and the Division of Pensions and Benefits will withhold 20% as required by the IRS.

    A SACT Distribution Form is required in order to receive benefits under this option only.

    3. A 5-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 five years of retirement, the named beneficiary will be paid the monthly annuity benefit until the end of the 5-year period.

    4. A 10-YEAR CERTAIN AND LIFE THEREAFTER OPTION provides 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.

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

    6. BENEFICIARY TO RECEIVE ONE-HALF BENEFIT OPTION provides a lesser monthly annuity benefit than Option 1. The annuity is paid for as long as the member lives. However, upon death, the named beneficiary will receive one-half of the member's monthly annuity for his or her lifetime. Under this option, the member may not change the named beneficiary 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 value of the underlying securities in the plan portfolio. This is the date that the account ceases to participate in the earnings and/or losses of the plan.

A quotation letter will reflect the estimated value of the member's account and the amounts that may be received 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 member's SACT retirement or withdrawal application, a copy of the retirement or withdrawal application from the basic retirement system and all other required information, a member's 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 loan balances against their regular pension accounts that are 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 Division's calculation of month-end unit values. Monthly annuity checks are mailed the first of the month following final approval of the member's application.

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

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Income Tax Information                   

A member's 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 or are receiving monthly annuity checks.

Lump-sum distributions from a SACT-TSA account 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.

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Early Retirement                                

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

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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-TSA.

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