Members may withdraw their contributions only when they terminate covered employment in New Mexico, and the former employer has provided certification of termination. Forms are available at each local administrative office. After the employee and former employer have completed the form, it must then be sent to the Educational Retirement Board for payment. Employer contributions are not placed in the memberís account and are not refundable to a member upon termination.
The New Mexico Educational Retirement Board adopted a change in all interest rates to be paid by the retirement fund effective September 1, 2003. The rates will be substantially lower than those paid in the past and realistically reflect current market trends. A regular refund is based on the 5 year Treasury Bond set on June 30, 2003. The ERB will continue to pay the current rate of 6.85% on all Regular Refund requests received and postmarked no later than August 30, 2003. Requests received after August 30, 2003 will be based on the new rate of 2.41%.
Interest is not earned on contributions credited to accounts prior to July 1, 1971 or on contributions on deposit for less than one year. The interest rate changes annually.
Upon a withdrawal of contributions, post-1983 contributions and interest are subject to federal income tax as ordinary income and are generally subject to a 10% penalty tax, as well. The taxable distribution may be rolled-over into an IRA or qualified employer plan under certain conditions, thereby avoiding the regular and penalty taxes. A refund may be in the form of a direct roll-over, direct refund, or a partial roll-over/direct refund. A roll-over, direct or partial, may be a payment of the memberís retirement contributions to an individual retirement account (IRA) or a qualified employer plan.
The ERB is required to withhold 20% of the taxable balance paid to the member on a partial roll-over or direct refund and forward it directly to the IRS as income withholding.
A member who dies prior to retirement and does not have Option B coverage, will have the total contributions plus interest paid to a designated beneficiary or to his or her estate. The interest paid in this case is determined by the ERB.
Upon the death of a member who has designated a minor as beneficiary, payment will not be made until the minor is age 18, or until the court appoints a guardian of the minorís estate.
A member who has withdrawn contributions in the form of a refund may regain credit for those contributions by paying the Educational Retirement Board the sum withdrawn plus interest compounded monthly for the period during which the funds were withdrawn