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Individual Account Program (IAP) Important Information to Consider Regarding IAP Distribution
Note:
If you retire from or withdraw your IAP account before age 59 ½, the distribution may be subject to a 10 percent penalty by the IRS. Members should seek the advice of a qualified tax professional regarding their individual situation.
What is the Individual Account Program (IAP)?
The IAP is a defined contribution retirement program for all active Tier One/Tier Two and OPSRP members.
If you are a Tier One or Tier Two member, you retained your existing Tier One or Tier Two regular and variable accounts, but as of January 1, 2004, no additional member contributions have been placed into those accounts. Instead, your 6 percent member contribution is now placed in your IAP account.
When you retire as a PERS Tier One or Tier Two or OPSRP Pension Program member, you can either withdraw your IAP account or apply for IAP retirement, depending on your age. However you are not required to take any action on your IAP when you retire (until you reach the age of 70 ½).
Contributions
Effective January 1, 2004, 6 percent of your salary has been placed in your IAP account. The IAP can have earnings or losses and administrative fees are deducted from the fund’s earnings as part of the annual crediting process. You are automatically vested in your IAP account when your account is established.
Earnings
Earnings are credited annually to member accounts. This allows PERS to work with employers to ensure that member contributions are accurate and complete before allocating earnings on a year-end balance basis so members are not adversely affected by posting delays or corrections.
At Retirement
There are several important factors to consider when deciding whether to apply for distribution from your account or to defer distribution beyond your Tier One or Tier Two or OPSRP retirement.
- IAP accounts are credited with investment earnings and losses annually and will continue to be subject to loss exposure until you remove the funds.
- IAP accounts have no guaranteed rate of return.
- The IAP account is invested in a broad mix of asset classes.
We suggest you consider whether this type of investment risk is one you are comfortable bearing.
You have the option to roll over your IAP account into a traditional IRA, an eligible employer plan, a 457 deferred compensation plan, the Oregon Savings Growth Plan, or other qualified plan.
When you retire from the IAP, you can receive your IAP account balance as a lump-sum payment or in installments over a 5, 10, 15, or 20-year or anticipated life span period.
For IAP members who are also Tier One/Tier Two members, IAP benefits are in addition to any other PERS retirement benefit the member is entitled to.
If a retired member dies before all installment payments are completed, the beneficiary is entitled to receive the remaining installment payments and may choose to receive the remaining amount in a lump-sum payment.
Background
The legislature created the IAP in 2003 to provide an individual account-based retirement benefit for new workers hired on or after August 29, 2003, and for Tier One/Tier Two members active on and after January 1, 2004. The IAP benefit is in addition to the member’s other retirement program benefit (i.e., Tier One, Tier Two, or OPSRP).
The IAP was established to receive member contributions on salary paid beginning January 1, 2004. All member contributions (6 percent of covered salary) have been deposited in the IAP since that date.
To continue to IAP Retirement forms click here.
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