Resignation

Many MWRD employees remain in MWRD employment until retirement. Not everyone stays until then. This page contains the information that you need in the event that you move on.

What are the options for the MWRD Retirement Fund contributions when you leave MWRD service? With some exceptions, when you leave MWRD employment you can:

1) Take a refund of your MWRD Retirement Fund contributions and have it paid directly to you.*

2) Take a refund or your MWRD Retirement Fund contributions and rollover the money into an individual retirement account (IRA) or other qualified retirement plan.*

3) Leave your contributions at the MWRD Retirement Fund.

Let's review each of the options in detail. Before we can do so, we will need to review whether you are a Tier I or Tier II Participant, as different rules apply to each.

Tier I Participant: An employee of the District who first became a member before January 1, 2011 under any reciprocal retirement system or pension fund established under Chapter 40 of the Illinois Compiled Statutes other than Judges Retirement System, General Assembly Retirement System, and all police and fire pension plans (whether Chicago or downstate). This includes any Commissioner who fits the criteria above who elects to participate in the Fund within 90 days after becoming a Commissioner.

Tier II Participant: An employee of the District who first became a member on or after January 1, 2011 except for those who were members of any reciprocal retirement system including the IMRF, Municipal Employees Annuity and Benefit Fund of Chicago, Laborers' Annuity and Benefit Fund of Chicago, County Employees Annuity and Benefit Fund of Cook County, Forest Preserve of Cook County Employees Annuity and Benefit Fund, Chicago Park Pension, State Employees Retirement System, State Universities Retirement System, Illinois Teachers Retirement System, or Chicago Teachers Pension Fund prior to January 1, 2011. This includes any Commissioner who fits the criteria above who elects to participate in the Fund within 90 days after becoming a Commissioner.

Description of the three options:

1) Take a refund of your MWRD Retirement Fund contributions and have it paid directly to you*.

If you are a Tier I Participant, you are eligible for a refund of contributions if:

You have separated from District employment either by voluntary resignation or termination; and
You are not over age 55 (age 50 if hired before June 13, 1997) with over 20 years of service; or
You are over age 60 with less than five years of service.

If you are over age 55 (age 50 if hired before June 13, 1997) with over 20 years of service; or if you are over age 60 with over five years of service, your only option for your MWRD Retirement Fund benefits is to take a monthly retirement annuity. If this describes your age and service combination, refer to the "Retirement Benefits" section of the website.

If you are a Tier II Participant, you are eligible for a refund of contributions if:

You withdraw prior to age 62, regardless of the length of service; or
You withdraw prior to attainment of 10 years of service, regardless of age.

When you take a refund of your MWRD Retirement Fund contributions, you give up your right to a future MWRD Retirement Fund benefit. Consider this decision carefully.

The MWRD Retirement Fund will withhold 20% from your contributions for federal withholding tax.
Taking a refund will subject you to income tax on the whole amount (unless the contributions were previously taxed).
In addition, if you are younger than age 55, you would have to pay a 10 percent early-withdrawal penalty to the IRS.

The MWRD Retirement Fund does not refund you the interest earned on your contributions.

Is a refund the choice for you?

Consider the likelihood that you will go back to work for the MWRD or in employment covered by an Illinois Reciprocal Retirement System. If you do, and if you leave your contributions at the MWRD Retirement Fund, you retain the credit toward a potential future MWRD Retirement Fund pension.
If you take a refund of contributions and later return to MWRD employment or employment covered by a reciprocal fund, your MWRD Retirement Fund service can be re-established by repayment of the refund plus 8% interest compounded annually. At this rate, the amount necessary to pay to re-establish service credit doubles every nine years. The cost would quadruple after 18 years, and be eight times the refund after 27 years, etc.
Would you be better served by rolling the money over into another type of tax-deferred plan to continue saving for retirement?
Because MWRD employees do not contribute to Social Security, Retirement Fund contributions may represent the only retirement savings for this period of employment.

If you are still interested in a refund of contributions, These are the next steps:

A) The former employee should complete the application for a refund of contributions. Click here to access that form.

B) Once the completed application is submitted to the Retirement Fund, Fund staff verifies that you have received your final payroll check from the MWRD and that you have had at least one payroll on which you have received no pay.

C) The refund amount is calculated.

D) Fund staff checks with both the MWRD and the Credit Union to ensure that there are no amounts due to either entity.

E) Assuming that there are no outstanding unreconciled debts, staff will make every effort to place the refund on the agenda for the next Retirement Board meeting.

F) Assuming Board approval at the meeting, the first of the month following the Board meeting, a check is drafted, payable to you for the amount of contributions. If you do not elect the rollover to an IRA, federal withholding tax will be deducted at 20% of the taxable portion.

G) In January of the year following the refund payment, you will receive a 1099-R, reflecting the distribution of pension contributions. This income should be included in your income tax return. Consult a tax professional for all concerns regarding your income reporting and your tax return.

2) Take a refund or your MWRD Retirement Fund contributions and rollover the money into an individual retirement account (IRA) or other qualified retirement plan*.

Eligibility for a refund of contributions as a rollover is identical to eligibility for the refund paid directly to you. The distribution is different. Instead of payment being made to you as a taxable distribution, the money is sent to a qualified IRA of your choosing. Consult a tax professional and/or a financial planner for full information on IRAs, portability, taxability, and any other concerns that you may have about your contribution refund distribution.

To rollover a refund of contributions, follow the same steps as those for a refund payable to you. You will be required to complete the portion of the refund application in Section 4 that pertains to a rollover. Click here for the refund application.

Regardless of whether you rollover or take a refund of contributions paid directly to you, you forfeit (give up) all MWRD Retirement Fund benefits and are no longer eligible for any retirement benefit, and your beneficiaries are not entitled to any death benefit.

Rollover to a Roth IRA is also an option. However, this type of distribution is rare, so we will not elaborate on this page. For full information on tax implications of a Roth rollover, you may contact a tax professional or financial planner.

3) Leave your contributions on deposit with MWRD Retirement Fund

You can leave your contributions on deposit with MWRD Retirement Fund after you leave MWRD service.

If you are vested, (have enough service credit to qualify for a monthly pension), you are eligible to receive a pension that will be paid for the rest of your life beginning as early as age 55 (or age 50, if you entered service prior to June 13, 1997) for Tier I Participants or age 62 for Tier II Participants.

If you participate in an Illinois Reciprocal System, your service credit from all funds can be combined to meet the vesting requirements for both systems. Please note you must have at least one year of pension service credit with any system in order for the service with that fund to be considered toward a reciprocal retirement annuity.

If you are leaving your MWRD employment and have less than one year of pension service credit with MWRD Retirement Fund, a refund or rollover may be the right choice for you.

Is keeping your contributions on deposit the choice for you?

Leaving your money with MWRD Retirement Fund can give you time to contemplate what to do with it. This is important if you don't know your job plans and you find employment with another governmental agency that participates in the Illinois reciprocal retirement system. If you work under another Illinois reciprocal system, your service credit may be combined toward a future MWRD Retirement Fund annuity.

* The refund of contributions paid to the individual or as a rollover is a forfeiture of service credit and associated benefits from the MWRD Retirement Fund.