Distribution Options
Your Distribution Options
- If the total value of your Basic Retirement benefit is less than $1,000, you must receive the entire value in a single lump-sum payment which you have the option of rolling into an IRA or other qualified retirement plan.
- If the cash balance account of your Basic Retirement benefit is $10,000 or less or you have been an MIT employee for 10 years or less, you may choose either a single lump-sum payment or an annuity form of payment.
- If the cash balance account of your Basic Retirement benefit is more than $10,000 or you have been an MIT employee for longer than 10 years, you will receive monthly lifetime income (annuity) payments.
Before retirement, contact the MIT Benefits Office to schedule a one-on-one consultation with a Retirement Counselor. You may obtain a Basic Retirement benefit calculation by accessing the online Pension Calculator. You may receive additional Plan information by reading the Basic Retirement Summary Plan Description (PDF).
Single lump-sum payment
If you are eligible for this option, you receive the entire present value of your benefit in a single lump-sum payment. MIT uses IRS required assumptions about current interest rates and your life expectancy to calculate the present value of your benefit. If you are married when you receive your lump-sum payment, your spouse must consent in writing to your selection of this option.
Monthly lifetime income annuity payments
Under these options, you receive monthly retirement payments (often referred to as annuity payments) for as long as you live. You may specify that these payments continue to be paid to your survivor after your death (referred to as joint life annuity payments), or you may specify that these payments end upon your death (referred to as single life annuity payments). You must select (only) one of these options before your payment begins.
If you choose to have payments end upon your death (single life annuity):
- You will receive the largest possible monthly payments under this option because no payments will be made to your survivors.
- If you are married when your payments begin, your spouse must consent in writing to your selection of this option.
If you choose to have payments continue to your survivor upon your death (joint life annuity):
- You will receive monthly payments as long as you live.
- If you are married when your payments begin, you must specify that your spouse receive at least 50% of the monthly amount you receive during your life unless your spouse consents in writing to your selection of this option.
- The amount of the payments you receive will be reduced by the percent of the benefit that you have arranged to be paid to your survivor after your death.
- After your death, the survivor you designated (also referred to as your contingent annuitant) will receive monthly lifetime payments until his or her death.
Period certain options
If you select either a single life annuity or a joint life annuity, you may add an option that continues payments for a minimum number of years. This minimum payment period, known as a period certain, may not exceed your life expectancy (or the joint life expectancy of you and your joint annuitant).
The period certain option is available in 5, 10, 15 and 20 year periods and can be likened to an insurance policy of sorts. The period certain can be added to any one of the benefit options available under the MIT Basic Retirement Plan, e.g., 50%, 66 2/3%, 75% and 100% Contingent Annuities or the Single Life Annuity. It's a "guarantee" that in the event of the participant's death, within the elected Period Certain, that the benefit will continue to be made payable to the beneficiary until the end of that Period Certain.
Example: A participant elects the "50% Contingent Annuity option with a 20 year Certain Period", and unfortunately passes away after receiving his benefit for 5 years. His spouse would then receive the participant's monthly benefit for the remaining 15 years of the Period Certain, however she passes away after receiving his benefit for 5 years. The remaining 10 years of the Period Certain would then go to his beneficiaries on file. In this case, his children are his designated beneficiaries and the remaining benefit is to be divided equally among them for the remaining 10 years, after which there is no further benefit.
If you are married when benefit payments begin, your spouse must consent in writing to your election of this option. This option will reduce the amount of your monthly lifetime annuity payment.
How your payments are taxed
Your monthly retirement payments are taxed when you receive them. If you are eligible and elect a single lump-sum payment payable to you:
- the full amount is taxable as regular income when you receive it. You are also generally subject to a 10% penalty if you are under age 59½ (exceptions to this penalty are outlined on the tax topics part of the IRS website).
If you roll over your lump-sum payment into another qualified retirement plan or IRA, it is a non-taxable event and the payment is subject to the rules governing that plan.
If you do not roll over your lump-sum payment to the MIT Supplemental 401(k) Plan, a traditional IRA, or other qualifying retirement plan:
- MIT automatically withholds 20% of the lump-sum payment, and that amount is applied to the federal income taxes you will owe.
- If you are a Massachusetts resident when you receive the lump-sum payment, MIT will also withhold state income taxes.
