DROP Distribution Request

The following form can be filled out online by tabbing though each field or placing your cursor in a specific field. Information typed into the form cannot be saved or submitted through the Internet. Once all information is completed, print the form and mail or fax to OP&F. Please be sure to sign and date the form, and, if required, have it notarized.

Complete this form if you are eligible and wish to withdraw your Deferred Retirement Option Plan (DROP) funds. You may be eligible to withdraw if you have retired and at least three full years have elapsed from your DROP effective date or you are a surviving spouse of a DROP participant. Unless you are a surviving spouse of a DROP participant, you must complete a Service Retirement Application before receiving any DROP withdrawals and meet the eligibility guidelines.

Payment methods

You may select from any one, or a combination of the following payment methods:

• up to four distributions per calendar year of at least $1,000 per request;
• a one–time lump sum distribution of your DROP balance;
• monthly distributions of at least $100; or
• rollover of your DROP funds to a qualified retirement plan.

Spousal consent is required if you are married and requesting a distribution of your DROP funds.

You have the option to receive your DROP distribution via Direct Deposit or as a check mailed to your home. DROP distributions will not be included with your monthly retirement benefit, but will be distributed separately.

Income taxes as penalties

In some cases, the Internal Revenue Service (IRS) will impose income tax penalties for early distributions from qualified retirement plans, as well as distributions under annuity contracts. Most penalties are 10 percent of the portion of the distribution that must be included as gross income. This primarily occurs if you will not turn age 55 by the end of the tax year when you receive the payment. OP&F does not withhold these penalties. Further information on income taxes as penalties is available in IRS Code Section 72.

DROP withdrawals are taxable

The IRS has issued a private letter ruling to OP&F on the taxability of the DROP funds. All money in your DROP account is likely to be taxable, in full, upon withdrawal. You may, however, have some basis recovery, or after–tax contributions that will offset a portion of these taxable benefits, but only if:

• you elect to receive a lump sum distribution of your total DROP accrual prior to the date your monthly retirement benefit payment begins; and
• the distribution is made within 90 days from the commencement date of your monthly retirement benefit payments.

For purposes of determining the election date for an entire lump sum distribution, the election date will be deemed to be the date received by OP&F.

Mandatory income tax withholding

OP&F must withhold 20 percent of the taxable portion of your withdrawal if your taxable portion is $200 or more within one calendar year and is distributed directly to you. It is possible to avoid paying this tax if you rollover your DROP funds to another qualified pension plan, a qualified 401(a) plan, 403(a) plan, 457(b) deferred compensation plan, 403(b) tax–sheltered annuity, or to an individual retirement account (IRA). As mandated by IRS rules, OP&F may be required to withhold at a higher tax rate.

You may rollover the withdrawal you received from OP&F within 60 days of receipt, but you will have only 80 percent of the taxable, or “pre-tax,” portion available for the rollover. You can make up the 20 percent that OP&F deducted from the initial withdrawal from any other funds you have available to you and include them in the rollover. Also, you may ask the IRS to waive the 60-day limit in this type of rollover. Further information on mandatory tax withholding is available in IRS Publication 505 and Special Tax Notice Regarding Plan Payments provided by OP&F.

Changing your tax withholding amounts

Changes to federal and state of Ohio tax withholdings must be made in writing and include the signature of the benefit recipient and Social Security number, subject to certain limitations. A Withholding Certificate for Ohio State Income Tax is available on the OP&F Web site at www.op–f.org, and the federal form W–4P is available upon request by calling OP&F Customer Service at 800–860–9599.

1099–R

OP&F will send you a 1099–R for any distribution you receive each calendar year. OP&F will issue your 1099–R by January 31 of the year following your distribution(s).

Subject to withholding orders

DROP distributions are subject to restitution orders, division of property orders, withholding orders for spousal or child support, and federal tax liens.

Final contributions and processing time

OP&F cannot determine the exact amount of DROP contributions eligible for withdrawal or rollover until your former employer deposits your final DROP contributions. Employers have until the last day of the month following the month of your termination to report these contributions. A withdrawal or rollover is normally issued within 90 days of your termination date, provided that all information needed by OP&F for processing has been received and is complete.

OP&F strongly encourages you to seek financial, legal and tax advice from professionals before withdrawing your DROP funds. OP&F cannot advise you on these issues.

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• DROP Distribution Request
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