Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2011 Page 14
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31There is an automatic rollover requirement for
the 60th day following the day on which you receive the
mandatory distributions. A mandatory distribution is a dis-
distribution.
tribution made without your consent and before you reach
The IRS may waive the 60-day requirement where the
age 62 or normal retirement age, whichever is later. The
failure to do so would be against equity or good con-
automatic rollover requirement applies if the distribution is
science, such as in the event of a casualty, disaster, or
more than $1,000 and is an eligible rollover distribution.
other event beyond your reasonable control. For more
You can choose to have the distribution paid directly to you
information on this waiver, see Revenue Procedure
or rolled over directly to your traditional or Roth IRA or
2003-16, in Internal Revenue Bulletin 2003-4. If you need
another qualified retirement plan. If you do not make this
to apply for a waiver, you must request a letter ruling, which
choice, OPM will automatically roll over the distribution into
requires the payment of a user fee. See Revenue Proce-
an IRA of a designated trustee or issuer.
dure 2012-4, available at
ar09.html, for information on letter rulings and Revenue
No tax withheld. If you choose the direct rollover option
Procedure 2012-8, available at
or have an automatic rollover, no tax will be withheld from
2012-01_IRB/ar13.html, for information on user fees. Both
any part of the distribution that is directly paid to the trustee
revenue procedures are in Internal Revenue Bulletin
of the other plan. However, if the rollover is to a Roth IRA,
2012-1.
you may want to choose to have tax withheld since any
A letter ruling is not required if a financial institution
amount rolled over is generally included in income. Any
receives the rollover funds during the 60-day rollover pe-
part of the eligible rollover distribution paid to you is subject
riod, you follow all procedures required by the financial
to withholding at a 20% rate.
institution, and, solely due to an error on the part of the
Payment to you option. If an eligible rollover distribution
financial institution, the funds are not deposited into an
is paid to you, the OPM or TSP must withhold 20% for
eligible retirement account within the 60-day rollover pe-
income tax even if you plan to roll over the distribution to
riod.
another qualified retirement plan, traditional or Roth IRA.
Frozen deposits. If an amount distributed to you be-
However, the full amount is treated as distributed to you
comes a frozen deposit in a financial institution during the
even though you actually receive only 80%. You generally
60-day period after you receive it, the rollover period is
must include in income any part (including the part with-
extended. An amount is a frozen deposit if you cannot
held) that you do not roll over within 60 days to another
withdraw it because of either:
qualified retirement plan or to a traditional IRA.
Rollovers to
Roth IRAs
are generally included in income.
•
The bankruptcy or insolvency of the financial institu-
If you leave government service before the calendar
tion, or
year in which you reach age 55 and are under age 59
/
1
2
•
Any requirement imposed by the state in which the
when a distribution is paid to you, you may have to pay an
institution is located because of the bankruptcy or
additional 10% tax on any part, including any tax withheld,
insolvency (or threat of it) of one or more financial
that you do not roll over. See Tax on Early Distributions in
institutions in the state.
Publication 575.
Exception to withholding. Withholding from an eligi-
The 60-day rollover period is extended by the period for
ble rollover distribution paid to you is not required if the
which the amount is a frozen deposit and does not end
distributions for your tax year total less than $200.
earlier than 10 days after the amount is no longer a frozen
deposit.
Partial rollovers. A lump-sum distribution may qualify
for capital gain treatment or the 10-year tax option if the
Qualified domestic relations order (QDRO). You may
plan participant was born before January 2, 1936. See
be able to roll over tax free all or part of a distribution you
Lump-Sum Distributions in Publication 575. However, if
receive from the CSRS, the FERS, or the TSP under a
you roll over any part of the distribution, the part you keep
court order in a divorce or similar proceeding. You must
does not qualify for this special tax treatment.
receive the distribution as the government employee’s
Rolling over more than amount received. If you want
spouse or former spouse (not as a nonspousal benefi-
to roll over more of an eligible rollover distribution than the
ciary). The rollover rules apply to you as if you were the
amount you received after income tax was withheld, you
employee. You can roll over the distribution if it is an
will have to add funds from some other source (such as
eligible rollover distribution (described earlier) and it is
your savings or borrowed amounts).
made under a QDRO or, for the TSP, a qualifying order.
A QDRO is a judgment, decree, or order relating to
Example. You left government service at age 53. On
payment of child support, alimony, or marital property
February 1, 2011, you receive an eligible rollover distribu-
rights. The payments must be made to a spouse, former
tion of $10,000 from your TSP account. The TSP withholds
spouse, child, or other dependent of a participant in the
$2,000, so you actually receive $8,000. If you want to roll
plan. For the TSP, a QDRO can be a qualifying order, but a
over the entire $10,000 to postpone including that amount
domestic relations order can be a qualifying order even if it
in your income, you will have to get $2,000 from some
is not a QDRO. For example, a qualifying order can include
other source and add it to the $8,000 you actually received.
an order that requires a TSP payment of attorney’s fees to
If you roll over only $8,000, you must include in your
the attorney for the spouse, former spouse, or child of the
income the $2,000 not rolled over. Also, you may be
participant.
subject to the 10% additional tax on the $2,000.
The order must contain certain information, including
Time for making rollover. You generally must complete
the amount or percentage of the participant’s benefits to be
the rollover of an eligible rollover distribution paid to you by
paid to each payee. It cannot require the plan to pay
Page 14
Publication 721 (2011)
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial