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Withdrawing Funds Early or Taking a Loan from a
Retirement Account before Retirement

State Universities Retirement System (SURS)

Under current law, you cannot borrow or take a partial withdrawal from the SURS accumulation.

University of Illinois Supplemental 403(b) Retirement Plan

Plan Distributions
For purposes of being eligible to take a distribution from the University of Illinois Supplement 403(b) Retirement Plan, a participant may receive a distribution from his or her plan account upon the earlier of:

  • Complete separation from service with the University (including hourly appointments)
  • Death
  • Disability
  • Attainment of age 59 ½ or older
  • Occurrence of a financial hardship

A participant may also receive a distribution of contributions that were made to the plan prior to January 1, 1989 if such contributions have been continuously segregated in the plan account.

Taxes and Pre-Tax Contributions

Federal Income Taxes
Federal Income taxes are deferred on pre-tax contributions and any earnings thereon until distributed from the plan. Distributions are taxed as ordinary income for federal income tax purposes and are generally subject to a 20% mandatory federal income tax withholding rate. Mandatory withholding will reduce the amount a participant actually receives upon withdrawing funds from the plan. However, the amount withheld will be credited against any taxes the participant owes for the year when the participant files his or her annual tax return. There are exceptions to the mandatory federal income tax withholding rule, including receiving the plan distribution as a lifetime annuity payment or directly rolling over the plan distribution to an eligible retirement plan (e.g., an IRA).

In addition, plan distributions made prior to attainment of age 59 ½ are generally subject to a 10% early withdrawal penalty tax. There are exceptions to the 10% early withdrawal penalty tax, including: receiving the plan distribution as a life-time annuity payment, receiving the plan distribution after terminating employment with the University at age 55 or older, or receiving the plan distribution after terminating employment due to a permanent disability.

State Income Taxes
State income taxes deferred on pre-tax contributions and earnings thereon. Distributions are not taxed by the State of Illinois if distributions are made 1) in accordance with plan provisions, 2) on or after the participant has attained full retirement age, and 3) the participant is a legal resident of the State of Illinois.

Taxes and Post-Tax (Roth) Contributions
Federal and state income taxes are withheld from post-tax (Roth) contributions at the time of they are contributed to the plan. However, earnings on contributions are not subject to federal and state income taxes upon distribution if a five year period has passed since the contributions were first made to the plan and the distribution is a "qualified distribution". A qualified distribution is a distribution 1) made on or after the date on which the participant attains age 59 ½, 2) made to a beneficiary on or after the death of the participant, or 3) attributable to the participant's being disabled.

A participant may receive a loan from his or her plan account. Loans are subject to both federal tax code and investment company rules and regulations. Please view the Loan Process Flow for additional information.

Facts about Borrowing from your Retirement Savings Plan - Fidelity publication

A participant may receive a hardship withdrawal from his or her plan account, under certain circumstances. Please view the Hardship Process Flow for additional information.

More Information
Please contact your investment provider for more information about distributions.

TIAA: 1-800-842-2776
Fidelity Investments: 1-800-343-0860

State of Illinois 457 Deferred Compensation Plan

Early Withdrawals
You are eligible for a distribution when you separate State service and are off any State payroll for 30 days. If you begin a relationship as an independent contractor providing personal services to the State within the 30 day period, you will not be considered terminated and thus not eligible for a distribution.

While on any State payroll, early withdrawal may only be granted in the event of extreme financial hardship or having an account balance less than $5,000. While your withdrawal will be subject to income tax, withdrawals are not subject to the 10% penalty tax, regardless of age at withdrawal.

Withdrawals of Roth contributions and their associated earnings may also be subject to partial taxation if they are not a qualified distribution. A qualified distribution is one that is taken upon attaining age 59 ½, death, or total disability, and at least five years have passed since the first contribution.

Contact T. Rowe Price for more information about early withdrawals.

On January 2, 2013 the 457 Deferred Compensation Plan added a loan provision. To inquire about a loan see the T. Rowe Price website or contact them at the number listed below. Only one loan from any state run retirement plan is permitted at any time, and employees will be asked to self-certify that they have no other outstanding loans prior to initiating a loan from this plan. Loans may not be taken using any Roth contributions.

Contact T. Rowe Price for more information or to initiate a loan.

Please Note: If you have an outstanding loan or a defaulted loan in the 403(b) plan, you may not take a loan from the 457 plan.

More Information



Maintained by University Human Resources | Contact Information | Last Update: 21-September-2017 | ID: 3156