Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits

A QDRO is a judgment, decree, or order relating to

Reasonable period of time. The TSP or OPM must

payment of child support, alimony, or marital property

provide you with a written explanation no earlier than 90

days and no later than 30 days before the distribution is

rights. The payments must be made to a spouse, former

made. However, you can choose to have the TSP or OPM

spouse, child, or other dependent of a participant in the

make a distribution less than 30 days after the explanation

plan. For the TSP, a QDRO can be a qualifying order, but a

is provided, as long as the following two requirements are

domestic relations order can be a qualifying order even if it

met.

is not a QDRO. For example, a qualifying order can include

an order that requires a TSP payment of attorney’s fees to

•

You must have the opportunity to consider whether

the attorney for the spouse, former spouse, or child of the

or not you want to make a direct rollover for at least

participant.

30 days after the explanation is provided.

The order must contain certain information, including

•

The information you receive must clearly state that

the amount or percentage of the participant’s benefits to be

you have the right to have 30 days to make a deci-

paid to each payee. It cannot require the plan to pay

sion.

benefits in a form not offered by the plan, nor can it require

the plan to pay increased benefits.

Contact the TSP or OPM if you have any questions about

this information.

A distribution that is paid to a child, dependent, or, if

applicable, an attorney for fees, under a QDRO or a quali-

Choosing the right option. Table 1 may help you decide

fying order is taxed to the plan participant.

which distribution option to choose. Carefully compare the

effects of each option.

Rollover by surviving spouse. You may be able to roll

over tax free all or part of the CSRS, FERS, or TSP

Table 1. Comparison of Payment to You

distribution you receive as the surviving spouse of a de-

Versus Direct Rollover

ceased employee. The rollover rules apply to you as if you

were the employee. You generally can roll over the distri-

Result of a

bution into a qualified retirement plan or a traditional IRA.

Affected item

payment to you

direct rollover

A distribution paid to a beneficiary other than the

The payer must

employee’s surviving spouse is not an eligible rollover

There is no

Withholding

withhold 20% of

distribution.

withholding.

the taxable part.

If you are under

How to report. On your Form 1040, report the total distri-

age 59

, a 10%

butions from the CSRS, FERS, or TSP on line 16a. Report

additional tax

the taxable amount of the distributions minus the amount

may apply to the

There is no 10%

rolled over, regardless of how the rollover was made, on

taxable part

additional tax.

Additional tax

line 16b. If you file Form 1040A, report the total distribu-

(including an

See Tax on early

tions on line 12a and the taxable amount minus the amount

amount equal to

distributions.

rolled over on line 12b.

the tax withheld)

that is not rolled

over.

Written explanation to recipients. The TSP or OPM

must provide a written explanation to you within a reasona-

Any taxable part

ble period of time before making an eligible rollover distri-

(including the

Any taxable part

bution to you. It must tell you about all of the following.

taxable part of

is not income to

When to report

any amount

you until later

•

Your right to have the distribution paid tax free di-

as income

withheld) not

distributed to you

rectly to another qualified retirement plan or to a

rolled over is

from the new

traditional IRA.

income to you in

plan or IRA.

the year paid.

•

The requirement to withhold tax from the distribution

if it is not directly rolled over.

•

The nontaxability of any part of the distribution that

How To Report Benefits

you roll over within 60 days after you receive the

distribution.

If you received annuity benefits that are not fully taxable,

•

report the total received for the year on Form 1040, line

Other qualified retirement plan rules that apply, in-

16a, or on Form 1040A, line 12a. Also, include on that line

cluding those for lump-sum distributions, alternate

the total of any other pension plan payments (even if fully

payees, and cash or deferred arrangements.

taxable, such as those from the TSP) that you received

•

How the distribution rules of the plan you roll the

during the year in addition to the annuity. Report the

distribution over to may differ from the rules that

taxable amount of these total benefits on line 16b (Form

apply to the plan making the distribution in their

1040) or line 12b (Form 1040A). If you use Form 4972, Tax

restrictions and tax consequences.

on Lump-Sum Distributions, however, to report the tax on

Page 14

Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2002 Page 14

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