Can “excess deductions” from the Civil Service Retirement System be rolled over into a Roth IRA?
Does anyone have experience with “excess deductions” and the Civil Service Retirement System (CSRS)?
Federal employees who work past 41 years no longer get credit for their CSRS pension even though they still have money deducted from their paycheck as long as they continue to work. Once they retire, they are offered a refund of the excess funds that were deducted but will not be applied to their pension for any years past 41 that they worked. It appears to be mostly after tax deductions with a smaller taxable amount for interest earned.
Has anyone been down this path before and perhaps have some insight? Thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2017-07-10 22:39
The OPS has not been keeping their forms up to date. The current distribution options are stated on a 2005 form that includes a TIRA rollover, or transfer of the taxable interest portion to the TSP and payment of the after tax excess retirement plan contributions to the participant. Direct rollovers from qualified plan to a Roth IRA did not become available until 2008. Since it is clear that this refund is rollover eligible, there is no reason that the entire amount could not be rolled over to a Roth IRA or even have the interest sent to the TSP or TIRA and the after tax amount to your Roth IRA. However, the Roth IRA option may still be foreign to the OPS and they may well deny the direct Roth rollover. In that case, I see no reason that you could not have the after tax amount refunded to you and then you do a 60 day rollover to your Roth IRA and report this on line 16 of Form 1040. It is amazing that google did not produce any evidence of even a prior discussion of this issue. Finally, note that this is entirely different than a VCP account that receives a large after tax contribution since OPM clearly recognizes that these can be rolled directly to a Roth IRA and people have been doing that for 8 years now.