By Mike Miles
MetLife annuity and RMD
April 2nd, 2013 | Uncategorized
Q. I am 70½ years old and about to retire under CSRS. If I use my Thrift Savings Plan account to purchase a MetLife annuity, how are the required minimum distributions handled?
A. Life annuity payments satisfy the RMD for the amount of money used to buy the annuity.
Tags: 70 1/2, CSRS, MetLife annuity, Required Minimum Distribution, retirement
VSIP and re-employment
March 6th, 2013 | Uncategorized
Q. I worked for the federal government for over 28 years. I retired last year under Voluntary Separation Incentive Pay provisions June 30, 2012.
I am considering re-employing/reinstating. Am I eligible to return to work on July 1, one year after retiring? Can I repay the VSIP in cash or in payments?
I read once that you can make payments for up to 36 months upon re-employment but am not sure whether this is correct. I understand the VSIP must be paid back before I return to work.
Upon re-employing with the government, will I be able to contribute to FERS and the Thrift Savings Plan?
I noticed on the USAJobs website that some Navy notices state you can’t contribute to the retirement or TSP if your a re-employing annuitant. Yet others I read from other government agencies remain silent on this issue.
A. Mike: From published Office of Personnel Management materials: “If a re-employed annuitant is performing service covered by FERS or CSRS (i.e., the appointment is made pursuant to 5 U.S.C. § 8468 or § 8344(a), respectively), the re-employed annuitant is eligible to participate in the TSP.
Agency contributions for a FERS re-employed annuitant must begin with the effective date of the reappointment to the FERS position as discussed in Section VI (A) of this bulletin. The re-employed annuitant may make contribution elections as discussed in Section III of this bulletin.
If a re-employed annuitant is not performing covered service (e.g., a FERS annuitant who is re-employed on an intermittent basis or an annuitant authorized to receive full salary and full annuity under P.L. 101-509 or the National Defense Authorization Act of 2004), the re-employed annuitant is not eligible to participate in the TSP.
Generally, re-employed annuitants are performing covered service. In most cases, if the annuitant indicator on the Standard Form (SF)-50, Nature of Action, is coded “1,” “4,” or “5,” the re-employed annuitant is eligible to participate in the TSP. In the case of a FERS re-employed annuitant, this will be reflected in the retirement code (which indicates FERS) because the annuitant is required to have FERS deductions taken from pay.
In the case of a CSRS re-employed annuitant, however, this may not be reflected in the retirement code because the annuitant may not be required to have CSRS retirement deductions taken from pay. Consequently, the retirement code of a CSRS re-employed annuitant may be “4” (i.e., none), though the annuitant is performing service covered by CSRS and is therefore eligible to participate in the TSP.”
Reg: You can return to work for the government at any time after you accept a VSIP. However, if you accept employment for compensation with the government of the U.S. within five years of the date of the separation on which the VSIP is based, including work under a personal services contract or other direct contract, you must repay the entire amount of the VSIP to the agency that paid it before your first day of re-employment.
Both things you read about re-employment are true. As a rule, your salary would be offset by the amount of your annuity and you would be able to contribute to the retirement fund. If you worked for a full year, you’d receive a supplemental annuity; if you worked for five years, you’d receive a redetermined annuity. On the other hand, there are certain limited authorities that would allow you to return to work and receive both your full annuity and the full salary of your new position. However, you would not be permitted to contribute to the retirement fund and, when you retired again, you wouldn’t be eligible for any additional retirement benefits.
Tags: annuity, contributions, CSRS, deduction, FERS, OPM, TSP, VSIP
Rollover to avoid taxes
February 27th, 2013 | Uncategorized
Q. I would like to roll over the money from one retirement account (my Thrift Savings Plan) to my CSRS retirement account, so as to avoid paying tax. How am I supposed to be able to do this since neither the TSP nor the Office of Personnel Management nor the Internal Revenue Service can give me an answer on if it is possible and if so, how? I would be paying service time from Sept. 10, 1973, to May 30, 1983, and from Aug. 25, 1997, to June 19, 1999.
A. You’re not supposed to be able to do it because it isn’t allowed.
Roth, Roth TSP and contribution limits
February 20th, 2013 | Uncategorized
Q. I am covered under CSRS. Can I still open an external Roth account and contribute the $6,000 maximum (plus catch-up)? If so, how would contributing to the Roth TSP interact with contributing to the external Roth?
A. The limits for the two are separate, but your eligibility to contribute to a Roth IRA depends upon your tax return for the year. If your income is too high, your Roth IRA contribution eligibility will be phased out. There’s a worksheet in IRS Publication 590 that will help you determine your eligibility.
Tags: catch-up contributions, CSRS, IRS, maximum contribution, Roth IRA, Roth TSP
Roth IRA contribution limit
February 18th, 2013 | Uncategorized
Q. I am a federal employee under CSRS and over the age of 50. I understand that the 2013 contribution limit for TSP is $17,500 plus an additional catch-up contribution of $5,500, for a total contribution limit of $23,000. My question concerns contributions also made to a Roth IRA account outside the Thrift Savings Plan. For the general public, I understand if you are under the Internal Revenue Service income limit, you can contribute $5,000 plus a $1,000 catch-up contribution to a Roth IRA. I am under this income limit. Therefore, can I contribute the $6,000 to my Roth IRA outside TSP and still contribute to the TSP, as long as I limit my contribution to the TSP to no more than $17,000 ($23,000 limit less $6,000)? Also, can my TSP contribution be made to the regular IRA even though my outside contribution is made to a Roth IRA?
A. The limit applies to IRA contributions, and not to your TSP contributions. If you participate in an employer-sponsored retirement plan, like the TSP, your eligibility to contribute to an IRA or a Roth IRA may be limited by your filing status and your income. Calculators to determine this eligibility are available all over the Internet, or you can check with a qualified tax preparer.
Tags: catch-up contributions, contributions, CSRS, income, IRS, retirement, Roth IRA, taxes, TSP
Taxes on annual TSP distributions
February 18th, 2013 | Uncategorized
Q. I am a retired CSRS employee. What taxes, if any, do I owe New York state on annual distributions? The initial contributions were not taxed by New York.
A. Your distributions are considered ordinary income for tax purposes. They should be reported as such on your federal and state tax returns, unless your state provides a special exemption for this type of income. If you want specific guidance for completing your tax return, you should seek the help of a qualified tax preparer.
Tags: contributions, CSRS, distribution, retirement, taxes, TSP
Refinancing and VCP
February 11th, 2013 | Uncategorized
Q. I am a 59-year-old federal employee with 34 years of service under CSRS. I am retiring soon and heard about the Voluntary Contributions Program. I don’t have a wad of cash except accessing some of the equity in my home (I have about $200,000 of equity, and I could pull up to $100,000 out). Is it worth refinancing (at a low 3.5 percent) to access the money and use the VCP to convert it into a Roth IRA?
A. Probably not, unless you need the cash for expenses.
Tags: conversion rule, CSRS, retirement, Roth IRA, voluntary contributions program
State taxes on TSP withdrawals?
February 11th, 2013 | Uncategorized
Q. All of my Thrift Savings Plan deposits are in the G Fund. I am a CSRS retiree. Since most of these funds are interest earned on federal bonds, are my withdrawals taxable by the state? I know they are federally taxable. I believe my contributions (which started in 1987) were both federal and state tax deferred, but I can’t recall with certainty. I called the Montana State Revenue once on this and they said they aren’t state-taxable, but I have my doubts.
A. You should consult a qualified tax preparer for the answer. In general, your withdrawals are taxable, unless your state offers an exception.
Tags: contributions, CSRS, G fund, retirement, tax deferred, taxes, TSP, withdrawal
Reporting rollover on taxes
February 11th, 2013 | Uncategorized
Q. I am retired and made a voluntary contribution to CSRS and then rolled it over to a Roth IRA in 2012, prior to my retirement. Now I’m interested in what I need to do, if anything, on my 2012 tax returns regarding this rollover. Will the Office of Personnel Management be sending me a Form 1099-R? Any advice on how to report on my 1040 will be helpful. Pub 590 (tax year 2011) says that “you do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan.”
A. We can’t tell you how to complete your tax return. Your tax preparer is responsible for that. If you’re not comfortable doing it yourself, you should find someone who is.
Tags: CSRS, OPM, retirement, rollover, Roth IRA, taxes, voluntary contribution
TSP withdrawals and state income tax
February 11th, 2013 | Uncategorized
Q. I understand that some states do not tax CSRS or FERS pensions. I also understand that there are some states that do not tax or only partially tax Thrift Savings Plan withdrawals. Would you please list the states that have income tax and that fully or partially tax TSP withdrawals?
A. Nope. You’ll have to do that research yourself. I suggest you start by directing your Web browser to “google.com.” Or, I’m pretty sure that Kiplinger.com can provide this info.