Taxable Loan Final Withdrawal at
member takes a pension loan using taxable funds within five years of retirement
and fully repays it by his/her retirement date, that loan will not be taxed.
However, any unpaid taxable loan balance at retirement is considered a taxable
plan distribution and may create or increase a shortage.
If the member with an unpaid taxable loan balance at retirement is under 50
years old, he/she will incur a 10% early withdrawal penalty. To avoid taxes and
the penalty, the member may roll this loan over to an IRA or other qualified
retirement plan within 60 days of retirement.
member may elect to withdraw up to 90% of his/her required amount at
retirement. This is called the final withdrawal (sometimes called the
“final loan”). The final withdrawal can consist of both taxable and/or
non-taxable funds. The final withdrawal will also create a
shortage. As with the above loan, the taxable
portion of a final withdrawal must be rolled over to an IRA or other qualified
retirement plan within 60 days of its issuance to avoid taxation and a possible
early withdrawal penalty.
At retirement, the Police
Pension Fund provides every retiree with the tax-free/taxable breakdown of their
ASF contributions as well as the tax-free/taxable composition of the final
withdrawal and any outstanding pension loans, as applicable.