Maryalice Posted January 24, 2021 Share Posted January 24, 2021 The federal Thrift Savings Plan allows retirees to direct the TSP to purchase an annuity from an insurance company (either the entire or partial balance of the participant) when participant retires. IRS pub 721 says the participant is not taxed until the annuity payments are paid to the participant. What IRS section allows the transfer of the purchased annuity from the TSP to the insurance company to be considered a nontaxable event? Is the annuity considered part of the TSP plan even though the insurance company is now in charge of the payments and issues the tax documents each year? Most plans require direct transfers or rollovers to remain tax free. Link to comment Share on other sites More sharing options...
Bird Posted January 25, 2021 Share Posted January 25, 2021 17 hours ago, Maryalice said: What IRS section allows the transfer of the purchased annuity from the TSP to the insurance company to be considered a nontaxable event? No idea...401 I suppose. 17 hours ago, Maryalice said: Is the annuity considered part of the TSP plan even though the insurance company is now in charge of the payments and issues the tax documents each year? No. I'm not familiar with the TSP plan reporting but I can tell you that regular 5500 reporting would show this on Schedule H, Expenses line e (2) To insurance carriers for the provision of benefits. Ed Snyder Link to comment Share on other sites More sharing options...
Luke Bailey Posted January 26, 2021 Share Posted January 26, 2021 I once (like 30 years ago) researched the issue for an ERISA-covered DB plan and concluded the source of the rule in that context was an old, c. 1960's or '70's Revenue Ruling. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
joel Posted February 24, 2021 Share Posted February 24, 2021 Maryalice; The TSP has designated the Metropolitan Life Insurance Company to be its annuity provider. The initial premium is a tax-free rollover from the TSP to Metropolitan Life. The annuity is not part of the plan because the same annuity contract is available to all of us. Of Note: The rates used by Metropolitan is substantially less than those used by the Federal Employees Retirement System (FERS) which provides the Defined Benefit component to the FERS-TSP package. As an example; the FERS uses a rate of 0.09728 for a 65 year old while Metropolitan Life uses a rate of 0.0624. Q.: Why isn't the FERS the designated annuity provide for the TSP? Link to comment Share on other sites More sharing options...
Mike Preston Posted February 25, 2021 Share Posted February 25, 2021 Probably because the FERS plan is self-insured and the Met policy is, by definition, not. You also probably have administrative loads on the Met policy that are much lower than FERS allows. In short, comparing a retail product to a massive federal program is a fools errand. Link to comment Share on other sites More sharing options...
joel Posted February 25, 2021 Share Posted February 25, 2021 8 hours ago, Mike Preston said: Probably because the FERS plan is self-insured and the Met policy is, by definition, not. You also probably have administrative loads on the Met policy that are much lower than FERS allows. In short, comparing a retail product to a massive federal program is a fools errand. The Annuity Contract Provider for the NYC-TRS 403(b) plan is the TRS; a DB plan. It's unfortunate that the TSP does not have the same relationship with its DB component; the Federal Employees Retirement System. Link to comment Share on other sites More sharing options...
joel Posted February 27, 2021 Share Posted February 27, 2021 On 2/25/2021 at 6:12 AM, joel said: The Annuity Contract Provider for the NYC-TRS 403(b) plan is the TRS; a DB plan. It's unfortunate that the TSP does not have the same relationship with its DB component; the Federal Employees Retirement System. The State of NJ administers a supplemental 403(b) plan labeled the Supplemental Annuity Collective Trust. The annuity payout option is offered via the NJ Division of Pensions. Again, it is unfortunate that the federal government would have their retiring employees buy a retail priced annuity with its much lower annuity income rates. Have the unions fell asleep at the wheel? Link to comment Share on other sites More sharing options...
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