The sum of a member’s contributions to NHRS, including mandatory contributions, any additional contributions, any contributions for service credit purchases, plus interest earnings.

When Vested Deferred Retirement May Commence

Group I (employees and teachers): With at least 10 years of creditable service, a Group I member may terminate NHRS-covered employment at any age and be entitled to receive a pension commencing at age 60, or an early reduced pension commencing between the ages of 50 and 59.

Pension Formula: AFC divided by 60, multiplied by years of creditable service = estimated annual pension amount

Group II (firefighters and police officers): With at least 10 years of creditable service, a Group II member may terminate NHRS-covered employment and be entitled to receive a pension commencing at age 60, or at the time when the member would have completed 20 years of creditable service, but not before age 45.

Pension Formula: 2.5% multiplied by AFC, multiplied by years of creditable service = estimated annual pension amount

Terminating Employment/Reduction in Work Hours

If a member terminates employment, must the member’s accumulated contributions be withdrawn immedately?

No. A terminated member may leave his or her contributions with NHRS indefinitely. A member will be deemed inactive after 180 days of absence from service and may request a refund of accumulated contributions. Any contributions not returned to a member after 180 days of the member’s absence from service will be credited with interest earnings at a lower interest rate than the rate applied to vested members’ contributions.

A terminated member who is vested may leave accumulated contributions with NHRS indefinitely, and interest earnings will be credited at the same rate as active members. Upon eligibility, vested members may apply for a Vested Deferred Retirement benefit.

In lieu of receiving a retirement benefit, members may elect a refund of accumulated contributions. A refund of accumulated contributions will result in a cancellation of service credit and forfeiture of all rights to benefits. Members are encouraged to consult a legal or tax advisor before requesting a refund.

Is a vested terminated member who elects a refund of accumulated contributions entitled to employer contributions made on the member’s behalf during periods of NHRS membership?
No. Members never receive a refund of their employer’s contributions. Employer contributions are never payable as a refund. Employer contributions are used to fund retirement pensions.

What if a member experiences a reduction in the number of hours worked such that the member is no longer eligible for active NHRS membership?
If a member’s hours are reduced below the minimum required for active NHRS membership, the member’s contributions to NHRS will cease. However, the member is not entitled to a refund of accumulated contributions while still employed by any employer which participates in the NHRS.

Returning to NHRS Service

What if a terminated member receives a refund of accumulated contributions and later becomes an NHRS contributing member again?
Upon returning to NHRS-covered employment, the individual will be required to complete an NHRS enrollment form as a new member and pay mandatory contributions to NHRS. After re-enrollment, the member may reinstate prior service of six months or more by paying back to NHRS his or her previously refunded accumulated contributions plus interest since the date of the refund.

Taxation

Are accumulated contributions taxable when refunded?

After-tax contributions refunded to a member are not subject to Federal income tax. Pre-tax contributions and interest earnings are subject to Federal income taxes.

A terminated member may defer Federal income taxes otherwise due on pre-tax contributions and interest by electing a rollover. Any pre-tax contributions and interest which are not rolled over are subject to Federal income taxes in the year refunded by NHRS to the member. For Federal income tax purposes, NHRS is required by law to withhold 20% of currently taxable refunds. Taxable refunds received before the terminated member reaches age 59½ may also be subject to an additional 10% tax on premature distributions. NHRS does not withhold the 10% additional tax from refunds. The additional tax is reported and paid on the member’s Federal income tax return for the year in which the refund was received. Members are encouraged to consult the IRS or a tax advisor and/or refer to IRS Publication 575 and IRS Form 5329 for additional information.

Borrowing Funds

May accumulated contributions be borrowed or withdrawn if a member is experiencing financial difficulties?

No. Accumulated contributions may not be withdrawn from NHRS by a member for any reason prior to termination of employment with any NHRS participating employers. Also, loans from NHRS to members are not permitted under any circumstances.

Application Process

When may a terminated member apply for a refund of accumulated contributions?

Group I - No sooner than 30 days after termination of employment, and only if the member does not become a contributing Group I member again during that 30-day period.

Group II – At any time after termination of employment.

What action is required to inform NHRS of a terminated member’s decision regarding accumulated contributions?

To leave accumulated contributions with NHRS – A terminated member who leaves accumulated contributions with NHRS needs to only inform NHRS, in writing, of any address change so that NHRS may provide periodic account updates to the member.

To apply for a rollover – The member must submit to NHRS a Terminated Member’s Application for Refund of Accumulated Contributions electing a rollover, a Terminated Member’s Request for Trustee-to-Trustee Transfer form, and either a copy of the member’s Social Security card or a completed IRS Form W-9. NHRS also requires an acceptance letter from the financial institution to where the accumulated contributions are to be transferred.

To apply for a refund - The member must submit to NHRS a Terminated Member’s Application for Refund of Accumulated Contributions and either a copy of the member’s Social Security card or a completed IRS Form W-9. If a refund is requested within six months after the member terminated employment, the member’s
former employer is required to complete Section 4 of the Application for Refund so NHRS will know that all contributions have been reported. If a refund is requested more than six months after the member’s termination of employment, completion of Section 4 is not required.

Upon receipt of a properly completed Application for Refund, NHRS is required by law to process the application within three months. Refund application packets may be obtained from the NHRS website at www.nhrs.org or by calling NHRS at (603) 410-3500.