Many members reach out to the ASRS hoping to borrow or withdraw funds from their ASRS account for many reasons, such as making a down payment on a home or supplementing household finances. Unfortunately, Arizona law does not authorize loans from ASRS pension accounts. As a result, active and inactive members are not permitted to borrow against or take partial withdrawals from their ASRS account. Access to funds in your ASRS account is only available in 2 instances: once you retire and begin taking a pension benefit, or if you terminate employment with your ASRS-participating employer and choose to refund your account.
If you choose to leave ASRS-covered employment and request a refund, you must withdraw the full amount of your account. Partial withdrawals are not permitted. Alternatively, you may leave your funds with the ASRS and maintain your membership status as an inactive member, retaining your service credit for future retirement benefits.
Refunding your account gives you several distribution options: receive the funds directly, roll them over into another qualified retirement account, or choose a combination of both.
Because ASRS pension contributions are made on a pre-tax basis, all refunds of ASRS contributions are subject to income tax. A refund that is paid directly to you will likely be subject to a 20% Federal Tax deduction, a 5% State Tax deduction, and for individuals under the age of 59.5, it is possible that the IRS will penalize you an additional 10% on your subsequent tax filing. If you choose to roll your funds into a qualified retirement fund, no taxes will be deducted.
Before refunding and terminating your ASRS membership, however, it’s important to consider the long-term impact. A refund cancels your ASRS service credit and forfeits your right to a future pension benefit and other member advantages, such as access to ASRS retiree health insurance. Remember - you can keep your funds with the ASRS and apply for retirement once eligible, even if you leave employment.
To explore your options, log into your myASRS account to run a personalized retirement estimate, or visit the Retirement Eligibility and Refunding pages on the ASRS website. If you're considering a refund or simply weighing your retirement path, connecting with an ASRS Retirement Specialist can help you make an informed decision based on your personal account.
