By Mike Miles
March 5th, 2013 | Uncategorized
Q. I did a direct rollover from the California Public Employees Retirement System (a tax-deferred retirement) into the Thrift Savings Program. I have received a Form 1099 from CALPERS. I do not know why CALPERS would send me a 1099 as the monies went directly from one tax-deferred account into another. Do I have to declare the CALPERS monies, even though they went directly from one tax-deferred account to another? If I have to pay taxes on these monies, wouldn’t that make my contribution to TSP ineligible? If I have to pay taxes on this direct rollover, wouldn’t that mean I would, in essence, be paying taxes twice on the same monies when I eventually withdraw them?
A. This is a question for a qualified tax preparer, but I don’t expect that your direct transfer will be taxed. The 1099 is likely just standard procedure since payers aren’t responsible for determining the tax status of a distribution, just meeting the reporting requirements.
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.
January 21st, 2013 | Uncategorized
Q. I am 47 years old and retired from the uniformed services almost three years ago. I work as a federal civilian. I have two Thrift Savings Plan accounts and two questions.
1. Can I roll my uniformed service account balance into my federal civilian account balance? If yes, how? If no … 2. If I don’t reinvest in another tax-deferred retirement account, and elect to withdraw 100 percent of my uniformed service balance, what penalties will I pay (if any) in addition to taxes?
A. You may combine your uniformed services TSP account into your civilian TSP account. Use Form TSP-65, which is available at www.tsp.gov.
January 9th, 2013 | Uncategorized
Q. I am a GS-14 criminal investigator with 16 years covered service, and I am expecting to contribute to the Thrift Savings Plan for another 10 years or so before retiring. I have been contributing the TSP maximum for the past 10 years. What is your guidance with the Roth option? Should I scale back my TSP contribution to the 6 percent minimum to capture the matching contributions and invest the rest with the Roth option?
A. Without a good reason to do otherwise, I prefer the tax-deferred contributions.
December 31st, 2012 | Uncategorized
Q. I was involuntarily separated under FERS discontinued service retirement with 26½ years of service. I was rehired to a federal job and opted to receive both salary and annuity. I no longer contribute to FERS and understand why I no longer get matching contributions to the Thrift Savings Plan, but why can’t I contribute my own money to TSP and get the tax deferral? I have a TSP account but do not plan on withdrawing money until I permanently retire in several years.
A. The only way that you’re allowed to contribute to the TSP is through payroll deferral or by transferring pretax money in from an IRA, 401(k), 403(b) or other qualified retirement plan.
December 10th, 2012 | Uncategorized
Q. I am retiring Jan. 23 from CSRS. Hence, I will be paid in 2013 for about 1½ pay periods. Can I have all of that pay go to the Thrift Savings Plan, tax-deferred? Can I also have my lump-sum annual leave payment go to TSP, tax-deferred, up to the annual limits?
A. Your pay can be deferred into the TSP, but not your leave payout.
August 14th, 2012 | Uncategorized
Q. I live in Alabama. I’m 32 and have worked about six years in the federal system. I am vested, and just left to work with a contractor. I have $7,400 in my Thrift Savings Plan account and want to do a full withdrawal. If I do the withdrawal, do I get that number since I’m vested, or only what I’ve contributed? Also, when or if I withdraw it, I know I will have 20 percent withheld. Will it hurt my tax return next year? If so, how do I avoid that?
A. You may withdraw your vested balance. That’s what “vested” means: It’s yours. The full amount of your withdrawal will be counted as ordinary income on the tax return for the year of the withdrawal. Any withheld amount will be credited against the tax you owe as a payment. You can reduce or avoid the tax effects of your withdrawal by rolling it over into another tax-deferred retirement plan, like a 401(k) or IRA.
July 9th, 2012 | Uncategorized
Q. I’m thinking of retiring at age 66 (I am FERS). How do I access my Thrift Savings Plan without any penalties or taxes? Is there a limit of withdrawal per month?
A. Because of your age at retirement, your TSP withdrawals will not be subject to the early withdrawal penalty. They will be subject to income tax, however, unless you roll the withdrawal over to another tax-deferred account.
May 14th, 2012 | Uncategorized
Q. If I contribute to the new TSP Roth, would I still receive the agency matching contributions?
A. Yes, but the agency contributions go into your tax-deferred account.
February 27th, 2012 | Uncategorized
Q: I have a question concerning the following paragraph from your Feb. 20 column in Federal Times:
I find it disappointing that it appears that you will not be able to manage, or withdraw, money selectively between the two options. Your contribution allocation and any interfund transfers you direct will apply to both options. Any withdrawals will be taken, pro rata, from both options. You may, however, split a rollover distribution between traditional and Roth IRA accounts.
Specifically, I am puzzled by the statement in the second sentence. As I understand the general concept with “tax deferred” individual retirement accounts and 401(k) plans, mandatory minimum withdrawals begin not later than April 1 of the year following the depositor reaching age 70 1/2. As I understand the general concept with “tax paid” — i.e., Roth IRAs and 401(k) plans — no mandatory minimum withdrawal is required earlier than the death of the contributor/owner of the tax-paid account.
If I understand the meaning of the language in the paragraph in your column, and assuming a Thrift Savings Plan participant has made both “tax deferred” TSP contributions and “tax paid” (Roth) contributions to the TSP, any mandatory minimum withdrawal from the tax-deferred segment of the TSP will result in a pro rata withdrawal from the tax-paid (Roth) option of the TSP.
Do I understand that the allocation mix in the non-Roth and the Roth segments of the plan must be identical? Given the option, I would elect to allocate greater risk to the Roth segment in order to avoid being forced to make mandatory minimum withdrawals after taking a “financial hit” similar to that which occurred during the period beginning in late 2007. Surely Congress could not have intended to impose a mandatory minimum withdrawal on “tax paid” (Roth) contributions to the TSP when it authorized the Thrift Savings Board to offer a Roth option to the TSP.
A: I based the comments in my column on the following excerpt from the TSP’s brochure: “A New TSP Element”
You will be able to take loans, in-service withdrawals, and partial withdrawals from your account as before. They will come out of your account on a pro rata basis — with a proportional amount from your traditional and Roth balances.
Details on how required minimum distributions will be handled have yet to emerge.