Review the withdrawal considerations if you make a withdrawal from your 403(b) SRA while you are a current U-M employee.
| Withdrawal Considerations |
Disability |
Hardship |
Age 59½ |
SRA Loan |
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403(b) SRA In-Service Withdrawal Options
| Generally subject to IRS 10% early withdrawal penalty? |
No |
Yes |
No |
No |
|---|
| Income tax due for tax-deferred SRA? |
Yes |
Yes |
Yes |
No |
|---|
| Income tax due for after-tax-Roth SRA? |
Qualified distributions: No
Yes if it is not qualified |
Qualified distributions: No
Yes if it is not qualified |
Qualified distributions: No
Yes if it is not qualified |
No |
|---|
| Can you still contribute to the Basic Retirement Plan? |
Yes |
Yes |
Yes |
Yes |
|---|
| Can you still contribute to the 403(b) SRA? |
Yes |
Yes |
Yes |
Yes |
|---|
| Requires Benefits Office approval? |
Yes |
No |
No |
No |
|---|
| Do you have to repay it? |
No |
No |
No |
Yes |
|---|
| How much can you access? |
Entire 403(b) SRA accumulation |
Contributions only, earnings are not available |
Entire 403(b) SRA accumulation |
45% of TIAA 403(b) SRA, 50% of Fidelity 403(b) SRA |
|---|
Notes:
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Qualified distributions from the after-tax Roth 403(b) SRA are generally tax-free when made after a 5-taxable-year period of participation and when it is: 1) made on or after the date you attain age 59½, or 2) made after your death, or 3) your being disabled as defined by Internal Revenue Code (IRC) Section 72(m)(7). If the distribution does not meet these criteria it is not qualified and income tax is due on the earnings. However, income tax is not due on the contributions of a nonqualified distribution since those amounts were subject to taxation when deducted from your paycheck.
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A 10% penalty generally applies to withdrawals made prior to age 59½ (with some exceptions) and generally applies to nonqualified distributions of after-tax Roth 403(b) SRA amounts. Consult with a qualified tax advisor for information on taxation of distributions and the IRS early withdrawal penalty.
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If you default on repayment of the 403(b) SRA loan, income taxes are due and an IRS early withdrawal penalty may apply if you are under age 59½.
403(b) SRA Disability Withdrawal
If you have a 403(b) SRA with TIAA or Fidelity, or both, you may withdraw your accumulations (up to all contributions and earnings) while you are still working for the university if you become disabled. The Internal Revenue Code defines an individual to be disabled if they are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration. Individuals applying for a disability withdrawal must provide verification of disability to the Benefits Office, such as proof of Social Security disability benefit entitlement. Income tax will be due on the amount you cash out (except for qualifying distributions of after-tax Roth 403(b) SRA amounts). The IRS 10% early withdrawal penalty does not apply to a disability withdrawal.
To arrange for a disability withdrawal, contact TIAA (800) 842-2252 or Fidelity (800) 343-0860 to request an SRA Disability Withdrawal Application. After completing your sections of the application, mail, fax, or deliver the application to the Benefits Office along with documentation of your disability status. The Benefits Office will complete the employer authorization section and forward the application to your investment carrier within three business days.
403(b) SRA Hardship Withdrawal
You may be eligible to withdraw your contributions (earnings are not available) if you have a 403(b) SRA with TIAA or Fidelity Investments due to a financial hardship. Income tax is due on the amount you cash out (except for qualifying distributions of after-tax Roth 403(b) SRA amounts) and cash withdrawals made prior to age 59½ are generally subject to an IRS 10% early withdrawal penalty. A hardship must meet two requirements, per regulations issued by the U.S. Treasury Department.
First, you must have an immediate and heavy financial need that falls under one of the following six categories determined by the IRS:
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Expenses for medical care that would be tax-deductible under Internal Revenue Code (IRC) section 213(d), for the employee, spouse, or dependents;
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Costs directly related to purchase of the principal residence (excluding mortgage payments) of the employee;
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Payment of tuition, related educational fees, and room and board expenses for the employee, spouse, or dependents for the next 12 months of post-secondary education;
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Payments necessary to prevent eviction of the employee from the employee’s principal residence or foreclosure on the mortgage of that residence.
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Payments for burial or funeral expenses for the employee’s deceased parent, spouse, children, or dependents;
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Expenses for the repair of damage to the employee’s principal residence if it was located in a federally declared disaster area.
Second, the hardship withdrawal cannot exceed the amount necessary to relieve the financial need and it cannot be satisfied from other resources reasonably available to you (“Safe Harbor method”).
To arrange for a 403(b) SRA hardship withdrawal, contact TIAA (800) 842-2252 or Fidelity (800) 343-0860 to speak with a counselor to determine if you are eligible. If you meet the eligibility criteria, TIAA or Fidelity will send you an application for the hardship withdrawal. Return your completed forms to the vendor with the appropriate documentation demonstrating the amount of the need and that it meets one of the six qualifying expenses.
403(b) SRA Age 59½ Withdrawal
If you have a 403(b) SRA with TIAA or Fidelity, or both, you may withdraw your accumulations (up to all contributions and earnings) while you are still working for the university starting at age 59½. Income tax will be due on the amount you cash out (except for qualifying distributions of after-tax Roth 403(b) SRA amounts). TIAA and Fidelity Investments are required by federal regulations to withhold 20% of the amount of the withdrawal for income tax purposes. There is no IRS 10% early withdrawal penalty on a withdrawal made at or after age 59½.
To arrange for a withdrawal, contact TIAA (800) 842-2252 or Fidelity (800) 343-0860 and request a 403(b) SRA withdrawal application.