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KYRetirement Systems

Refund/Withdrawal of Account Balance FAQ's

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  1. What can I do with my retirement account upon leaving employment with a participating agency?
  2. When can I apply for a refund of contributions?
  3. Will I be eligible for a refund of member contributions if I am in a "Layoff Status" or on Leave Without Pay?
  4. Do I receive my employer's contributions if I take a refund?
  5. How do I apply for a refund of my contributions?
  6. How long will it take for KRS to issue refund of my contributions?
  7. Can I roll my refund of contributions into another retirement plan?
  8. Do I have to pay taxes on the amount received if I take a refund of my contributions?
  9. Will I be able to withdraw a portion of my KRS retirement account for use as a down payment on the purchase of a home or to use in an emergency situation?
  10. Can I take a "loan" out on my retirement?
  1. What can I do with my retirement account upon leaving employment with a participating agency?
    Upon termination of employment, you have three options in regard to your retirement account: retire if eligible, take a refund of retirement contributions, or leave the contributions in the retirement system until you reach retirement eligibility.
  2. When can I apply for a refund of contributions?
    You may apply for a refund of your account balance at any time after termination of employment with a participating agency. However, you must apply for the refund of contributions before going back to work for an agency participating in the same retirement system.
  3. Will I be eligible for a refund of member contributions if I am in a "Layoff Status" or on Leave Without Pay?
    No. A termination of employment must occur before a member is eligible for a refund of member contributions per KRS 61.625.
  4. Do I receive my employer's contributions if I take a refund?
    No. Employer contributions are paid into the Retirement Allowance Account and are not co-mingled with funds directed to the Member's Contribution Account. Upon termination of employment, you are only eligible to receive a refund of employee contributions deposited to your Member Contribution Account plus any accrued interest accrued on those contributions.
  5. How do I apply for a refund of my contributions?
    You must contact the retirement office to request a Form 4525, Application for Refund and Direct Rollover/Direct Payment Selection and to verify that you have a completed Form 2001, Membership Form on file. Your agency reporting official is also required to submit a completed Form 2020 or Personnel Action Form listing your date of termination. A refund cannot be issued until all three forms are completed and filed with the retirement office.
  6. How long will it take for KRS to issue refund of my contributions?
    Provided you have completed and filed all necessary forms to apply for a refund of contributions, the process to issue refund of contributions will take about six to eight weeks.
  7. Can I roll my refund of contributions into another retirement plan?
    Your refund of contributions can be paid directly to you or you can elect to roll the funds over into another qualified retirement plan.
  8. Do I have to pay taxes on the amount received if I take a refund of my contributions?
    If you elect to receive a direct payment, KRS is required to withhold 20% for federal income taxes. The amount withheld is not a penalty tax and will apply towards your federal tax liability for the year in which the refund was issued. Additional taxes due to age or other factors may also apply if you receive a direct payment.

    If you elect to rollover the funds into another qualified plan, the payment will not be subject to federal income taxes at the time of withdrawal.
  9. Will I be able to withdraw a portion of my KRS retirement account for use as a down payment on the purchase of a home or to use in an emergency situation?
    No. KRS retirement plans do not provide for "withdrawal for hardship clause", nor any other type of partial account balance withdrawals. A termination of employment must occur in order for a member to be eligible for a refund or rollover of member contributions per state statute.
  10. Can I take a "loan" out on my retirement?
    Pursuant to KRS 61.575, no funds shall be made available from the member's contribution account unless the member's employment has been TERMINATED and the member is NOT participating in the same retirement system.

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