If you want to roll over your after-tax contributions to an employer
plan that accepts these rollovers, you cannot have the after-tax
contributions paid to you first. You must instruct OPM to make a
direct rollover on your behalf. Also, you cannot first roll over
after-tax contributions to a traditional IRA and then roll over that
amount into an employer plan.
II. Direct Rollover
A DIRECT ROLLOVER is a direct payment of your refund to a
traditional individual retirement arrangement (IRA), a Roth IRA, or an
eligible employer plan that will accept it. You can choose a DIRECT
ROLLOVER of all or any portion of your refund, as described in Part I
on the previous page. You are not taxed on the taxable portion of your
payment (interest amount) for which you choose a DIRECT
ROLLOVER until you later take it out of the traditional IRA or eligible
employer plan. In addition, no income tax withholding is required for
any taxable portion of your refund for which you choose a DIRECT
ROLLOVER to a traditional IRA or eligible employer plan. You
cannot choose a DIRECT ROLLOVER if your refund payment is less
than $200.
DIRECT ROLLOVER to a Traditional IRA or a Roth IRA. You can
open a traditional IRA or a Roth IRA to receive the direct rollover. If
you choose to have your refund paid directly to a traditional IRA or a
Roth IRA, contact an IRA sponsor (usually a financial institution) to
find out how to have your payment made in a direct rollover to a
traditional IRA or a Roth IRA at that institution. If you are unsure of
how to invest your money, you can temporarily establish a traditional
IRA to receive the payment. However, in choosing a traditional IRA,
you may want to make sure that the traditional IRA you choose will
allow you to move all or a part of your payment to another traditional
IRA or to a Roth IRA at a later date, without penalties or other
limitations. See IRS Publication 590, Individual Retirement
Arrangements, for more information on traditional IRAs and Roth IRAs
(including limits on how often you can roll over between IRAs).
DIRECT ROLLOVER to a Plan. If you are employed by a new
employer that has an eligible employer plan and you want a direct
rollover to that plan, ask the plan administrator of that plan whether it
will accept your rollover. An eligible employer plan is not legally
required to accept a rollover. Even if your new employer's plan does
not accept a rollover, you can choose a DIRECT ROLLOVER to a
traditional IRA. If the employer plan accepts your rollover, the plan
may provide restrictions on the circumstances under which you may
later receive a distribution of the rollover amount or may require
spousal consent to any subsequent distribution. Check with the plan
administrator of that plan before making your decision.
Change in Tax Treatment Resulting from a DIRECT ROLLOVER.
The tax treatment of any payment from the eligible employer plan
or IRA receiving your DIRECT ROLLOVER might be different than if
you received your benefit in a taxable distribution directly from the
Office of Personnel Management (OPM).
Direct Rollover to the Thrift Savings Plan (TSP). If you choose to roll
part or all of the taxable portion of your distribution into your TSP
account, you need to submit form TSP-60, Request for Transfer Into the
TSP, along with your refund application. This form is available on the
internet at www.tsp.gov. Fill out your portion of the form; we will
complete our portion and fax it to the TSP office for processing.
The form must be approved by the Thrift Savings Board and the Board
must notify OPM to transfer the funds.
III. Payment Paid to You
If your payment can be rolled over (see Part I on the previous page) but
the payment is made directly to you, the interest portion is subject to
20% federal income tax withholding (state tax withholding may also
apply). The payment is taxed in the year you receive it unless, within
60 days, you roll it over to a traditional IRA or an eligible employer
plan that accepts rollovers. If you do not roll it over, special tax rules
may apply.
Income Tax Withholding:
Mandatory Withholding. If any portion of your payment can be rolled
over under Part I on the previous page and you do not elect to make a
DIRECT ROLLOVER, OPM is required by law to withhold 20% of the
interest portion (taxable amount). This amount is sent to the Internal
Revenue Service (IRS) as federal income tax withholding. For
example, if you can roll over a taxable payment of $10,000, only
$8,000 will be paid to you because OPM must withhold $2,000 as
income tax. However, when you prepare your income tax return for the
year, unless you make a rollover within 60 days (see "Sixty-Day
Rollover Option" below), you must report the full $10,000 as a taxable
payment from OPM. You must report the $2,000 as tax withheld, and it
will be credited against any income tax you owe for the year. There
will be no income tax withholding if your payments for the year are less
than $200.
Sixty-Day Rollover Option. If you receive a payment that can be rolled
over under Part I on the previous page, you can still decide to roll over
all or part of it to a traditional IRA, a Roth IRA, or to an eligible
employer plan that accepts rollovers. If you decide to roll it over, you
must contribute the amount of the payment you received to a traditional
IRA or eligible employer plan within 60 days after you receive the
payment. The portion of your payment that is rolled over will not be
taxed until you take it out of the traditional IRA or the eligible
employer plan. Tax on a Roth IRA rollover must be paid in the year the
rollover is made.
You can roll over up to 100% of your payment that can be rolled over
under Part I on the previous page, including an amount equal to the
20% of the taxable portion that was withheld. If you choose to roll over
100%, you must find other money within the 60-day period to
contribute to the traditional IRA or the eligible employer plan, to
replace the 20% that was withheld. On the other hand, if you roll over
only the 80% of the taxable portion that you received, you will be taxed
on the 20% that was withheld.
Example: The taxable portion of your payment that can be rolled over
under Part I on the previous page, is $10,000, and you choose to have it
paid to you. You will receive $8,000, and $2,000 will be sent to the
IRS as income tax withholding. Within 60 days after receiving the
$8,000, you may roll over the entire $10,000 to a traditional IRA or an
eligible employer plan. To do this, you roll over the $8,000 you
received from OPM, and you will have to find $2,000 from other
sources (your savings, a loan, etc.). In this case, the entire $10,000 is
not taxed until you take it out of the traditional IRA or an eligible
employer plan. If you roll over the entire $10,000, when you file your
income tax return you may get a refund of part or all of the $2,000
withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did not
roll over is taxed in the year it was withheld. When you file your
income tax return, you may get a refund of part of the $2,000 withheld.
(However, any refund is likely to be larger if you roll over the entire
$10,000.)
Additional 10% Tax If You Are under Age 59-1/2. If you receive a
payment before you reach age 59-1/2 and you do not roll it over, then,
in addition to the regular income tax, you may have to pay an extra tax
equal to 10% of the taxable portion of the payment. The additional
10% tax generally does not apply to (1) payments that are paid after
you separate from service with your employer during or after the year
you reach age 55, (2) payments that are paid because you retire due to
disability, (3) payments that are paid directly to the government to
satisfy a Federal tax levy, (4) payments that are paid to an alternate
payee under a qualified domestic relations order, or (5) payments that
do not exceed the amount of your deductible medical expenses. See
IRS Form 5329 for more information on the additional 10% tax.
Additional Tax Information
This notice summarizes only the federal (not state and local) tax rules
that might apply to your payment. The rules described above are
complex and contain many conditions and exceptions that are not
included in this notice. Therefore, you may want to consult with the
IRS or a professional tax advisor before you take a payment of your
refund from OPM. You can find more specific information on the tax
treatment of payments from qualified employer plans in IRS
Publication 575, Pension and Annuity Income, and IRS Publication
590, Individual Retirement Arrangements. For an overview of the tax
consequences of payments from the Civil Service Retirement System
and Federal Employees Retirement System, you can also consult IRS
Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.
These publications are available from your local IRS office, on the
IRS's Internet Web Site at www.irs.gov, or by calling
1-800-TAX-FORMS.
SF 2802
Revised September 2013
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