Rollover?

[lets-retire]

I currently have a balance in a Florida State retirement account. I am contemplating taking the money out of that account and purchasing several years of military time for the federal government. Florida retirement has two different type of programs. The first is your typical pension where you work for so many years and receive a certain percentage per year for your retirement. The second, the one I have, each paycheck the agency deposits money into an account for you, similar to a 401, but you can not deposit any of your money in it. When you retire you receive the money (there's more to it, but it is not relevant to my question). If I take the money out of the Florida retirement account to pay for my military time and roll any excess over to an IRA will I be taxed on the amount and have to pay the penalty? I have looked through the IRS website, but have been unable to find anything that addresses the question, so if you know could you post where the information is.

A quick description of the plan can be found at https://www.myfrs.com/content/frs_programs/new_invest_plan.html
It says I can roll the balance over to an IRA or another employers plan, but does purchasing military time fall into this category?

 

[Goonie]

I had a similar, though slightly different situation. When I ER'd at 50 years old, I had paid into a state municipal pension (in IL) for 30+ years. A small portion of what I'd paid in was automatically set aside as a 'spousal pension'. Upon retirement, since I didn't have a spouse, the 'spousal pension' (with interest) was refunded to me. I used some of it to 'buy' 5 years of service credit.....effectively adding 5 years to the 30+ years I'd worked......so my pension is based on 35+ years, rather than the actual 30+.

Anyway, the money from the 'spousal pension' that I used to 'buy' the time was not taxed. And there was no any penalty to pay for early withdrawal, because it was never actually withdrawn, only rolled over into a qualifying plan (purchasing pension time). I rolled the balance of the 'spousal pension' into a Rollover IRA, so it wasn't taxed either, nor was there any penalty on that amount.

I'm not sure how buying military time would be handled, but I'd guess that it would be the same or similar to my situation since it's for a qualified plan. I'd contact the FRS people at the toll free number at the bottom of that website, and ask them.......I'm fairly certain they know the answer. Prior to my ER I had a bunch of questions, and was calling the pension folks on a regular basis for info and answers.......they were always happy to explain things.

Good luck with your plans!
goon

 

[ats5g]

A better question to start off with might be "How do you buy military pension credits?" If it can be done with money in an IRA, then whether the FRS money can be directly used to buy military pension credits is moot since you can roll the FRS money into an IRA.

Try calling the Hotline #: MyFRS Financial Guidance Line toll-free at 1-866-446-9377

 

[Leonidas]

This stuff gets to be complicated. My plan had a DB and a lump sum component that consisted partly of pre-tax money. Most of the lump sum I rolled over into an IRA, but I got a check for part of it. Reading the documentation and trying to match it up to IRS regs was giving me a headache. The people who knew the most about how the tax situation worked and explained it the best were the folks at the pension. After talking with them I looked again at the IRS stuff and it made sense then. I would start with the people at the FRS and ask them.

 

[lets-retire]

Thanks, I talked with the FRS people and they gave a definite probably. Actually they refereed me to the administrator of my new retirement program.