Home  >  Financial Articles and Q&A  >  I want to know if I can transfer my Union pension to my...

I want to know if I can transfer my Union pension to my government TSP savings plan.

Jan 31, 2015 by Mike in  |  Flag
2 Answers  |  4 Followers
Follow Question
1 vote

Mike- it will depend upon the type of union plan that you have, and whether it is I qualified for a direct rollover into TSP. You can read more about the TSP rules for rolling into the plan here: https://www.tsp.gov/planparticipation/transfers/methods.shtml.

Since you wrote "pension" in your question I am thinking this may be a defined benefit plan not a defined contribution plan. In other words, the union plan will pay you you periodic annuity based on your years of service, highest income level, etc. I have found that these plans generally offer generous embedded annuity rates, so it might not be in your interest to roll over or take a lump sum distribution, even if you are permitted to do so. You should consult with a financial planner to obtain a comparison of benefits. This should be an easy calculation for a qualified advisor. If you private message me I would be happy to have one of our analysts do it for free.

All the best, Jim

Comment   |  Flag   |  Jan 31, 2015 from San Francisco, CA

1|600 characters needed characters left
1 vote
Larry R Frank Sr Level 20

The TSP is an excellent program Mike. tsp.gov has an excellent page that describes the benefits of doing so (https://www.tsp.gov/planparticipation/transfers/benefits.shtml). The TSP website says this "You may wish to consolidate your investments by moving money into the TSP from other eligible employer plans or Individual Retirement Accounts (IRAs). The TSP offers low administrative costs, a range of investment options, and a choice of traditional (pre-tax) and Roth (after-tax) contributions."

The key phrase above is "eligible employer plans." What this means is that you really need to ask your union plan contact whether the union plan ALLOWS transfers out of the plan to other plans such as IRAs or the TSP in your case. They may, or may not allow it at all. Or, they may allow it after you've reached a certain age. You won't know the answer until you ask them, or look at the Union Plans documentation for what their specific rules are.

If it is transferable, then the next step is seeing what paperwork the Union requires to transfer it out. You would also use form TSP-60, Request for a Transfer Into the TSP (on tsp.gov use search term TSP-60) to notify TSP money is coming, etc.

Of course, a key consideration is whether the pension payments are better as compared to the lump sum they'd transfer to the TSP. Here's a calculator that may help you evaluate that comparison (http://www.calcxml.com/calculators/lump-sum-or-payments). If you'd like assistance in the evaluation, you could find a fee-only adviser at www.napfa.org who, as a fiduciary, would only advise you with your interest's in mind since a fee only adviser has no sales agenda or products to try and sell.

This is a great question Mike!

1 Comment   |  Flag   |  Jan 31, 2015 from Roseville, CA
Jess Peterson

Talk to your union plan contact they should be able to answer this no problem. Just whatever you do make sure any transfer of money goes into the right account type. Qualified account to qualified account etc...so you don't get into trouble with the IRS come tax time.

Flag |  Feb 27, 2015

1|600 characters needed characters left