How do I Request a Partial Withdrawal?

Active members and deferred members may make a partial withdrawal from The Plan once every 12 -month period (not the calendar year). According to VIP Terms and Conditions, active members are limited to a maximum withdrawal amount equal to the total of all contributions less a mandatory amount of contributions ($5.00 per bi-weekly pay period multiplied by the number of pay periods of membership). VIP Requests for Partial Withdrawal Forms should be completed and submitted to The Plan office by the end of day on Friday of a pay week.

Internal Revenue Service (IRS) regulations require partial withdrawals to include proportionate amounts of contributions and profit. The profit portion of the withdrawal will be subject to tax. If the profit portion of the withdrawal is less than $200.00, the member will receive the full amount requested. If the profit portion is more than $200.00, a 20% federal withholding tax will apply. In addition, the IRS may impose a 10% early withdrawal penalty on the profit portion of the withdrawal. Only by rolling over the profit portion to an IRA or eligible pension plan does the participant avoid 20% federal withholding tax and the 10% early withdrawal penalty. Each withdrawal is unique; therefore, any tax liability is determined at the time of the transaction. At that time, the participant will be advised of the taxable amount.

Can I Request a Full Withdrawal?

Full withdrawals may be made only upon resignation or retirement and are processed approximately one month after separation. Withdrawal request forms must be received by The Plan by Friday of a pay week. Checks will be available for distribution the following pay week Friday.

What Are My Options Upon Retirement or Resignation?

You may defer withdrawals until a future date or close your account.

Defer withdrawal(s) until a later date:  (A) There is no tax liability until a participant makes a withdrawal. (B) Participants who defer withdrawal are not permitted to contribute further to The Plan. However, they may transfer equity from one fund to another once per 90-day period. Deferred participants will receive quarterly statements until they withdraw all funds. (C) Deferred participants can request partial withdrawals, limited to one every 12-month period (not the calendar year)., or a full withdrawal at any time. When a deferred participant makes a withdrawal, the profit portion, if not rolled over into an IRA or other eligible pension plan, will have 20% withheld for federal income tax. In addition, a 10% early withdrawal penalty will apply to the profit portion if the withdrawal is being made before age 59 1/2 and participant had separated from service before age 55. Participants who separated from service at age 55 or older will not incur the 10% early withdrawal penalty upon withdrawal. (D) Required minimum distribution (RMDs) will begin at age 73 in accordance with IRS instructions. VIP is a 401(a) qualified employer sponsored pension plan and cannot be aggregated with other IRA accounts when determining RMD amounts.

Close the account by taking a full withdrawal:  (A) The profit portion of the withdrawal has accumulated tax-deferred and may be rolled over into an Individual Retirement Account (IRA) or other eligible pension plan, while continuing to defer taxes. A participant may elect to receive a separate payout of the after-tax contributions, or to rollover the contributions along with the profit, to an IRA or an eligible employer pension plan that will accept it. (B) If the participant does not opt to rollover the profit portion, 20% of the profit portion will be withheld for federal income tax. In addition, a 10% early withdrawal penalty on the taxable profit portion may apply if the participant separates from service before age 55.

What is the Tax Status of the VIP?

A major benefit to members is the preferential tax deferred status the VIP enjoys as a qualified pension plan. All increases in the value of a member’s account resulting from appreciation and The Plan’s investment of interest, dividends, and capital gains distributions are exempt from taxation until a partial or full withdrawal is made. Additionally, as a qualified plan, rollovers of VIP accounts to other qualified plans and IRAs may be accomplished in accordance with IRS instructions.

The tax information contained herein is based on our current interpretation of the Internal Revenue Code. While we are pleased to provide you with this material, we acknowledge that it is not all-inclusive and we assume no liability for it. We recommend you consult a reputable tax advisor regarding any questions you may have concerning the applicability of this information to your personal situation.

Federal Income Tax Information:  The entire value of your account in The Plan, reduced by any after-tax contributions, is fully taxable in the year distributed. Ordinary income tax rates for that year will apply unless the special rules for transfers or income averaging, described below, pertain to your situation.

A 10% penalty is generally imposed on the taxable portion of an early withdrawal from The Plan unless the distribution is on account of death, disability, or separation from service after age 55. The penalty for early withdrawal can be avoided if the taxable portion of the withdrawal is rolled over to a traditional IRA or eligible pension plan. Other exceptions to the penalty may apply. Note:  As a result of the passage of the Economic Growth and Tax Relief Act of 2001 (EGTRRA), a participant may elect to rollover the total account, including after-tax contributions, into a traditional IRA or an eligible employer plan that will accept it.

The Plan is required by the IRS to withhold 20% federal income tax from all taxable partial and full withdrawal distributions. In order to avoid the 20% mandatory withholding tax, participants must rollover any taxable distributions into another qualified plan or traditional IRA. RMDs are taxed at 10% unless otherwise requested by the member.

State and Local Tax Information:  State and local taxability of qualified retirement plan benefits varies widely among taxing jurisdictions. Therefore, we offer no information on the state/local tax implications for withdrawals from The Plan.

How Can a Beneficiary Collect VIP Benefits?

If a participant dies, and the spouse is the Primary Beneficiary, VIP allows the beneficiary five years to decide on the distribution of benefits. The beneficiary of a deceased VIP participant has the same full withdrawal option as the participant. Beneficiary withdrawals do not incur the 10% early withdrawal penalty. This information is general in nature and beneficiaries should seek competent tax advice for their own individual situations.

Can My Equity be Verified as an Asset?

The VIP will verify a participant’s equity (the account’s total current value) upon receipt of such request from a member.