Advice on moving money out of low-earning pension plan

Apologies in advance for how stupid this question is, I have minimal knowledge on these matters.

Background: I am in my mid-30s. I worked for a city municipality in the United States for 2.5 years. During that time, I put the maximum I could into the city’s retirement plan (11%). I was recruited to a much better job within my field late last year, and subsequently resigned from my position within the municipality.

My new job (non-profit sector) offers a Simple IRA plan with a 3% employer match, which is way better than the 0% with the municipality. I’ve been contributing since April, when I became eligible (6 month wait before eligibility for the Simple IRA). I do not have any other retirement accounts (please don’t judge).

As of today, my pension/retirement account from the municipality has approximately $19,509 in it. It barely gains any interest. The plan is portable. I think the APY last year was 1.13%. Obviously I’d like to move this money somewhere else, where it can actually accrue interest, and I’d like to do this soon.

The problem is that I cannot roll these funds into my new Simple IRA until the account has been open for two years, so April 2028. I’ve looked into IRA and Roth IRA, but the contribution limit for each is $7500 per year. This leaves ~$12,000 left to deal with. The way the municipality’s system works is that I cannot take a partial withdrawal. If I take anything out, I have to close the account. These means I have to roll everything into a new account, or withdraw a portion into a retirement account and receive a check for the rest. This means paying the 20% IRS penalty PLUS the 10% early withdrawal fee, which I obviously want to avoid.

My question is, what is my best option? Do I wait almost two years, allowing money that could be earning better interest to just sit there? Do I roll some of it into a retirement account and put the rest into a CD or HYSA, paying penalties? Any advice is welcome. TIA.