QUOLKE'S CORNER
IMPORTANT MESSAGE FOR RETIREES REGARDING SEVERANCE PAYMENT
Just a reminder to all those who are retiring this year. Severance pay(30% of unused sick leave up to $30,000) will be disbursed in one of two ways per the Collective Bargaining Agreement.
IF YOU WILL ATTAIN AGE 55 OR OLDER IN THE CALENDAR YEAR OF RETIREMENT:
If you are age 54 but will turn 55 by Dec. 31st…this applies to you. If you fall in this category and will be receiving a severance pay from the district then it is MANDATORY for employees to enroll in a 403(b) and have the severance pay deposited into that 403(b). The only 403(b) Tax Sheltered Annuity that is used for this severance plan is VALIC. If you don’t have an account with VALIC you must establish one before you can access your severance payment. Once you have your account set up, you can leave that money in your VALIC account or transfer if you have another 403(b) account with another provider. This is a great plan and your severance is not taxable until you withdraw it from you account. The transfer between different annuity providers is not a withdrawal, so you will not be taxed. Additionally, since you are over 55 or attaining age 55 in the year you retire, if you do choose to withdraw these monies, you will not be penalized for an early withdrawal (you will simply pay the taxes on the amount of money you need). As always, consult with you financial planner or annuity provider on what best meets your financial needs.
IF YOU ARE NOT 55 OR OLDER IN THE CALENDAR YEAR OF RETIREMENT:
It is not mandatory to enroll in a 403(b). Severance will be paid in a lump sum payment no later than 2 1/2 months after the effective date of retirement. This will result in a pretty significant amount of your severance being taxed. Employees may elect to have all or a portion of the severance deferred to a tax sheltered annuity. Please check with your financial planner regarding withdraw of the dollars and any penalties that might apply.