754-7          RETIREMENT FUNDS

Retirement funds are annuities or work-related plans for providing income when employment ends. They include such items as pension, disability, or deferred compensation plans administered by an employer or union. They also include funds held in individual retirement accounts (IRA) and plans for self-employed persons, sometimes called Keogh plans.

Retirement funds fall into two general categories:

• Retirement Savings Accounts, which are owned and can be accessed by the individual; and
• Pension Plans, which are established by an employer.

754-7 A.      RETIREMENT SAVINGS ACCOUNTS

Retirement savings accounts are individually owned, and money may be deposited and withdrawn at will. These funds are available, countable resources regardless of an individual's employment status. These accounts include:

• Individual Retirement Accounts (IRAs);
• Keogh plans; and
• Simplified Employer Pension Plans (SEPs), which are considered IRAs by banks and the IRS.

754-7 B.      PENSION PLANS

Pension plans (including PERSAlaska's Public Employees Retirement System and SBSAlaska's Supplemental Benefit System) that are established by an employer are exempt while the individual is employed with the employer. These types of plans include:

• 457 plans (plans for state and local governments and other tax-exempt organizations);
• 401(k) plans (generally a cash-or-deferred arrangement and generally limited to profit-making firms);
• Federal Employee Thrift Savings plan;
• Section 403(b) plans (tax-sheltered annuities provided for employees of tax-exempt organizations and state and local educational organizations); and
• Section 501(c)(18) plans (retirement plans for union members consisting of employee contributions to certain trusts that were established before June 1959).

Availability of Pension Plan Funds:

If an individual is no longer working for the employer who established the pension plan, and is not yet eligible for periodic payments from the plan, it is an available, countable resource if the individual has the option of withdrawing the money as a lump sum.

When the funds in a pension plan cannot be immediately withdrawn and used to meet the needs of the family, the account balance is considered unavailable and not countable if:

1. The individual demonstrates that they have applied and are pursuing having the account balance made available to them; and
2. Receipt of the funds cannot be expected in the month for which eligibility is being determined.

If the individual is eligible for periodic payments from a pension plan, the individual must apply for such payments under development of income requirements. In this situation, the account balance is not a resource, but the periodic payments are counted as income.

If an individual refuses or fails to make a reasonable effort to secure these funds, either as a lump sum or as periodic payments, they are considered available and countable.

754-7 C.      DEFERRED COMPENSATION PLANS

Deferred compensation plans are evaluated based on whether the individual can access the funds while still employed with the employer that established the account.

If the individual can access the funds while still employed, the deferred compensation plan considered available and countable.

For other deferred compensation plans, such as the one offered by the State of Alaska, the individual may not withdraw the funds while still employed. Such plans are treated as pension plans.

If an individual is no longer working for the employer who established the deferred compensation plan, it is an available, countable resource.

754-7 D.      VALUE OF RETIREMENT FUNDS

The value of any retirement fund is the account balance minus any expected penalties or fees for withdrawal.