Lump Sum Distribution FAQs | University of Miami

Lump Sump Distributions

1. What is a partial lump sum option?
2. Can I elect to take a partial lump-sum distribution from the Employees’ Retirement Plan?
3. If I elect to take a portion of my retirement plan benefit in a lump sum what happens with the balance of my retirement plan benefit?
4. Is the lump sum distribution taxable?
5. What is the Rule of 70?
6. If I meet the Rule of 70, when do I make my election to take a partial lump sum distribution?
7. If I meet the Rule of 70 but I am not planning on retiring yet, can I make my election to take a partial lump sum distribution now?
8. If I do not meet the Rule of 70 when I retire or leave the University, will I be able to take a partial lump sum distribution?
10. What are benefit restrictions?
11. When will the lump sum option go back to 60 percent?
12. Will I receive notification when the ERP benefit restrictions are suspended?
13. If I retire after September 1, 2010 and elect the 50 percent lump sum distribution, can I get the remaining 50 percent when benefit restrictions are lifted?
14. Are all University of Miami funded retirement plans subject to benefit restrictions effective September 1, 2010?
15. If I retire and take a lump sum distribution from the retirement plan, can I be reemployed at the University?

What is a partial lump sum option?
The partial lump-sum payment option permits retirees to elect to receive up to 60 percent of the benefit earned in the ERP in one lump-sum. The remaining benefit will be paid monthly according to the form of payment selected.

Can I elect to take a partial lump-sum distribution from the Employees’ Retirement Plan?
Yes, if you meet the Rule of 70 when you separate from service, you have an opportunity to make a one-time election to receive a portion of your benefit as a lump sum distribution. If your retirement date is on or before August 31, 2010, you can elect to take a lump sum distribution in an amount equal to any whole percentage up to a maximum of 60 percent of retirement benefits earned. If your retirement date is on or after September 1, 2010, you can elect to take a lump sum distribution equal to any whole percentage up to a maximum of 50 percent of retirement benefits earned.

If I elect to take a portion of my retirement plan benefit in a lump sum what happens with the balance of my retirement plan benefit?
The balance of your retirement plan benefit will be paid monthly for your lifetime in accordance with the distribution option you select. Click here to view distribution options.

Is the lump sum distribution taxable?
Yes, the lump sum distribution is taxable income and will be reported in full on the recipients 1099-R. The University is required to withhold 20% for federal income tax unless rolled over into a qualified pre-tax investment vehicle. Please consult with your financial advisor.

What is the Rule of 70?
The Rule of 70 means your age plus your years of service equals or exceeds 70 at the time you separate from employment with the University of Miami.

If I meet the Rule of 70, when do I make my election to take a partial lump sum distribution?

Your election to take a partial lump sum distribution can be made if you are within 90 days of the date you wish to retire and commence retirement benefit payments.

If I meet the Rule of 70 but I am not planning on retiring yet, can I make my election to take a partial lump sum distribution now?
No. The election to receive a partial lump sum cannot be made unless you are within 90 days of the date you wish to retire and commence receiving retirement benefit payments.

If I do not meet the Rule of 70 when I retire or leave the University, will I be able to take a partial lump sum distribution?
No. The partial lump sum distribution is only available to participants who meet the Rule of 70.

What do I have to do if I want to retire and elect to receive a partial lump sum distribution?
If you wish to retire on or before August 31, 2010, complete the Retirement Calculation Request Form as soon as possible but not less than 45 days prior to the date you wish to commence receiving retirement benefit payments. This will allow Benefits Administration sufficient time to calculate your retirement plan benefit, discuss distribution options with you and process your retirement benefit payment. If you wish to retire on or after September 1, 2010, complete the Retirement Calculation Request Form at least 90 days prior to the date you wish to commence receiving retirement benefit payments. Benefits Administration will mail a calculation to your home address, discuss the distribution options with you and process your retirement benefit payment.

If I do not elect the partial lump sum distribution at the time of retirement, will I have another opportunity to make this election?
You must make the election to receive a lump sum distribution at the time you decide to begin receiving retirement benefit payments. Availability of the lump sum distribution is subject to federal law in effect on your benefit commencement date. You can delay receipt of pension payments as late as the April 1st following the year you turn age 70 1/2. If you are over age 70 1/2 when you separate from service then you can delay payments until the April 1st following the year in which you separate from service.

What are benefit restrictions?
The stock market decline has significantly impacted the funding status of the University of Miami ERP plan. As a result, under Federal law, the percentage of the benefit earned that can be paid in a lump sum beginning on September 1 of this year must be restricted to a maximum of 50 percent (instead of 60 percent available through August 31, 2010).

When will the lump sum option go back to 60 percent?
The larger lump sum will be available once the funded status of the plan reaches 80 percent pursuant to current requirements under federal law.

Will I receive notification when the ERP benefit restrictions are suspended?
Yes. A notice will be sent to ERP participants once benefit restrictions are lifted.

If I retire after September 1, 2010 and elect the 50 percent lump sum distribution, can I get the remaining 50 percent when benefit restrictions are lifted?
You have a one-time opportunity to elect a partial lump sum distribution, which is at the time you elect to begin retirement benefit payments. If at the time you begin retirement benefit payments, the maximum lump sum distribution available is 50 percent, you will not be able to take another 50 percent at the time that benefit restrictions are lifted.

Are all University of Miami funded retirement plans subject to benefit restrictions effective September 1, 2010?
No. Only the ERP is subject to benefit restrictions as it is a defined benefit plan. The benefit restrictions do not affect the Faculty Retirement Plan or the Retirement Savings Plan as they are defined contribution plans. It is important to remember that in previous years, there was no partial lump sum distribution available to participants in the ERP. This is a new option available to employees who meet the Rule of 70 upon separation from employment at the University of Miami.

If I retire and take a lump sum distribution from the retirement plan, can I be reemployed at the University?
If you retire and receive a lump sum or a monthly benefit from the University, you cannot be reemployed until one year has elapsed from your date of retirement.