Leaving MTRS service prior to retirement

If you leave teaching before retiring from the MTRS, you will need to decide what you want to do with your annuity savings account:

• receive a retirement allowance, if eligible,
• take a refund of your annuity savings account, or
• leave your funds on account with the MTRS until some future date or event.

If you leave service and wish to leave your funds on account, you do not need to notify us that this is what you are doing. We will simply keep your funds on account and continue to send you annual statements that show your balance and any activity, such as the addition of interest. Please note, however, that although your statement will reflect interest each year, you may not be eligible to receive all of the accrued interest if and when you later apply for a refund.

If, at the time you leave service, you are under age 55 and you have 10 years of creditable service, you may leave your funds on account until you attain age 55, at which time you may then apply for a retirement allowance. For more information on retirement benefits, please go to Retiring from the MTRS.

If, however, you do not take a refund but later return to a position which requires membership in a Massachusetts contributory retirement system, all interest reported on your statements will be credited. Additionally, since you left your money on account, you will be entitled to your “old” contribution rate (the contribution rate in effect at the time you left service) in your new position.

If I leave my funds on account with the MTRS, do I have to report anything to the IRS?

No—the money in your account is not taxable until it is paid to you in a refund or retirement allowance, or paid to someone else as a result of your death.

Are there any circumstances under which my account would NOT earn interest or I would not be entitled to receive all of the accumulated interest?

Yes—provided you are not subject to any forfeiture provisions due to criminal conviction, the amount of interest you are entitled to receive is based on three factors: whether your leaving service was voluntary or involuntary, how much creditable service you have, and when your refund is paid. If your refund is paid on or after July 1, 2010, and you leave (or left) service by:

• RESIGNING VOLUNTARILY, and you have:
  • less than ten years of creditable service, you will receive interest at the rate of 3% on your accumulated total deductions.
  • ten or more years of creditable service, you will receive interest at the regular rate at which it has been credited to your account (in other words, the actual amount of interest you have accrued).
• BEING INVOLUNTARILY TERMINATED, you will receive interest at the regular rate at which it has been credited to your account (in other words, the actual amount of interest you have accrued).

In addition to the above situations, and regardless of the amount of creditable service you have, if you apply for a refund more than two years after the date of your termination of service, you are eligible to receive the interest accumulated only for the two years immediately following that date.