Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2002 Page 13
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28•
An eligible state or local government section 457
Exception to withholding. Withholding from an eligi-
ble rollover distribution paid to you is not required if the
deferred compensation plan.
distributions for your tax year total less than $200.
The CSRS, FERS, and TSP are considered qualified re-
Partial rollovers. If you receive a lump-sum distribu-
tirement plans.
tion, it may qualify for capital gain treatment or the 10-year
tax option. See Lump-Sum Distributions in Publication
Distributions eligible for rollover treatment. If you re-
575. However, if you roll over any part of the distribution,
ceive a refund of your CSRS or FERS contributions when
the part you keep does not qualify for this special tax
you leave government service, you can roll over any inter-
treatment.
est you receive on the contributions. You cannot roll over
any part of your CSRS or FERS annuity payments.
Rolling over more than amount received. If you want
You can roll over a distribution of any part of your TSP
to roll over more of an eligible rollover distribution than the
account balance except:
amount you received after income tax was withheld, you
will have to add funds from some other source (such as
1) A distribution of your account balance that you
your savings or borrowed amounts).
choose to receive in monthly payments over:
Example. You left government service at age 53. On
a) Your life expectancy,
February 1, 2003, you receive an eligible rollover distribu-
tion of $10,000 from your TSP account. The TSP withholds
b) The joint life expectancies of you and your benefi-
$2,000, so you actually receive $8,000. If you want to roll
ciary, or
over the entire $10,000 to postpone including that amount
c) A period of 10 years or more,
in your income, you will have to get $2,000 from some
other source and add it to the $8,000 you actually received.
2) A required minimum distribution generally beginning
If you roll over only $8,000, you must include in your
at age 70
/
,
1
2
income the $2,000 not rolled over. Also, you may be
subject to the 10% additional tax on the $2,000.
3) A declared distribution because of an unrepaid loan,
if you have not separated from government service
Time for making rollover. You generally must complete
(see Outstanding loan under Thrift Savings Plan,
the rollover of an eligible rollover distribution by the 60th
earlier), or
day following the day on which you receive the distribution.
The IRS may waive the 60-day requirement where the
4) A hardship distribution.
failure to do so would be against equity or good con-
In addition, a distribution to your beneficiary generally is
science, such as in the event of a casualty, disaster, or
not treated as an eligible rollover distribution. However,
other event beyond your reasonable control.
see Qualified domestic relations order and Rollover by
Frozen deposits. If an amount distributed to you be-
surviving spouse, later.
comes a frozen deposit in a financial institution during the
60-day period after you receive it, the rollover period is
Direct rollover option. You can choose to have the OPM
extended. An amount is a frozen deposit if you cannot
or TSP transfer any part of an eligible rollover distribution
withdraw it because of either:
directly to another qualified retirement plan that accepts
•
rollover distributions or to a traditional IRA. The distribution
The bankruptcy or insolvency of the financial institu-
cannot be rolled over into a Roth IRA.
tion, or
•
No tax withheld. If you choose the direct rollover op-
Any requirement imposed by the state in which the
tion, no tax will be withheld from any part of the distribution
institution is located because of the bankruptcy or
that is directly paid to the trustee of the other plan.
insolvency (or threat of it) of one or more financial
institutions in the state.
Payment to you option. If an eligible rollover distribution
The 60-day rollover period is extended by the period for
is paid to you, the OPM or TSP must withhold 20% for
which the amount is a frozen deposit and does not end
income tax even if you plan to roll over the distribution to
earlier than 10 days after the amount is no longer a frozen
another qualified retirement plan or traditional IRA. How-
deposit.
ever, the full amount is treated as distributed to you even
though you actually receive only 80%. You generally must
Qualified domestic relations order (QDRO). You may
include in income any part (including the part withheld) that
be able to roll over tax free all or part of a distribution you
you do not roll over within 60 days to another qualified
receive from the CSRS, the FERS, or the TSP under a
retirement plan or to a traditional IRA.
court order in a divorce or similar proceeding. You must
If you leave government service before the calendar
receive the distribution as the government employee’s
year in which you reach age 55 and are under age 59
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/
spouse or former spouse (not as a nonspousal benefi-
2
when a distribution is paid to you, you may have to pay an
ciary). The rollover rules apply to you as if you were the
additional 10% tax on any part, including any tax withheld,
employee. You can roll over the distribution if it is an
that you do not roll over. See Tax on Early Distributions in
eligible rollover distribution (described earlier) and it is
Publication 575.
made under a QDRO or, for the TSP, a qualifying order.
Page 13
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