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Federal Employees Benefits Q &A

Do you have questions about your federal employee CSRS or FERS pension/annuity or federal employee retirement planning? Concerns about your Thrift Savings Plan (TSP) account or what about federal employee pay and leave issues?

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The Q&A forum is moderated by Ed Zurndorfer -- an expert on federal employee benefits -- and a Certified Financial Planner, chartered life underwriter and chartered financial consultant in Maryland.

Zurndorfer is also the author of several federal employee benefits guides published by Federal Employees News Digest.

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#1 Posted : Monday, April 02, 2012 6:00:57 AM(UTC)

Rank: Newbie

Groups: Registered
Joined: 8/2/2007(UTC)
Posts: 10

In a recent answer on this topic, you said that "Among the advantages of the Roth IRA for those close to retirement is the fact that after retirement, those employees who have contributed to the Roth TSP (which starts sometime this spring) will be able to rollover their Roth TSP accounts to a Roth IRA."  This is what I was assuming, but a recent newsletter from the TSP on the Roth option included some confusing information.  https://www.tsp.gov/PDF/formspubs/high12b.pdf . This document says:

--You will not be able to transfer money into the TSP from Roth IRAs. Also, you will not be
able to convert money that is already in your TSP account into Roth money.
--Any transactions you make — such as interfund transfers, contribution allocations, loans, beneficiary designations, and withdrawals —will apply in equal proportions to the Roth and traditional balances.
--Roth TSP and Required Minimum Distributions (RMDs). The year after you turn age 70½, the IRS requires you to begin receiving a minimum amount of money from your account (unless you are still working). This is your RMD, and it is calculated based on your account balance and IRS life expectancy tables. IRS requirements for RMDs apply to employer-sponsored retirement plans like the TSP with no exceptions; therefore, RMDs will apply to Roth money in your TSP account, even though they do not apply to Roth IRAs.

I expected the first restriction, but it is the last item that is really confusing. This seems to be saying we have to take RMD distributions from both regular and Roth TSP accounts. If so, how could we roll over the Roth TSP into a Roth IRA if this type of accounting applies?
Ed Zurndorfer  
#2 Posted : Monday, April 02, 2012 11:06:45 AM(UTC)
Ed Zurndorfer

Rank: Senior Member

Groups: Registered
Joined: 9/10/2001(UTC)
Posts: 4,412

Those TSP participants who have Roth accounts will be required to take a required minimum distribution (RMD) from their Roth TSP account every year starting the year they become age 70.5. But if these Roth TSP participants rollover all of their Roth TSP accounts to an existing Roth IRA (which they will be permitted to do) shortly before the year they become age 70, then they will not be required to take an RMD from their Roth TSP accounts because the entire Roth TSP account will be in a Roth IRA (that does not require an RMD). 

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