TSP 2009 RMD Rollover to Roth??

I am a retired federal employee, age 72, drawing RMD’s from my TSP account. The TSP requires a $25/month RMD, in spite of the new law which waives the mandatory withdrawal for 2009. TSP issued my January 2009 RMD before I was able to minimize the withdrawal amounts for the rest of 2009. Three questions:
(1) within 60 days from my receipt of it, can I rollover the January amount to my preexisting Roth account (not part of TSP) after I pay taxes on this amount; and can I do likewise for the remainder of the 2009 withdrawals–i.e., pay taxes on the RMD’s and roll them into the Roth?
(2) Is rolling over the RMD I am forced to receive to my Roth a viable and wise choice? I’ll have to pay tax on the distribution anyway and would rather preserve the “IRA-ness” of the money and let it grow tax free, etc. (all the benefits of the Roth).
(3) How/why can the TSP require a $25/month distribution in light of the new law? TSP brochures indicate that it’s required by the IRS, but the IRS says it is not their requirement and that the law says $0 is required for 2009 RMD.

Thanks for your assistance!



1) Yes, you can do a Roth conversion by rolling over those TSP distributions in 2009 as long as your modified AGI does not exceed 100,000. You can do this because those distributions are not technically RMDs under the WRERA signed by Bush on 12/23/08. The 60 day time limit applies, but you do not have to be concered with the one rollover limit per IRA per 12 month period because rollovers neither conversions or TSP distributions count. If you do this every month, you will technically have 12 different Roth conversions for 2009, so if you choose to recharacterize, they will all have to be calculated separately. Of course, the 60 day time limit will allow you to reduce the actual number of conversion contributions to 6 if you wish.

2) No problem as long as you do not need the money. And even if you do, your Roth is fully qualified if your first Roth contribution was made prior to 2005, and all distributions are tax free. After 59.5 there is no longer a holding period for Roth conversions either. Just be sure to stop these rollovers in 2010, because they will become RMDs again in 2010 and cannot be rolled over. You could convert amounts in excess of the RMD in future years, however.

3) This is likely a systems caused problem, and IRA and qualified plan custodians are all handling this in their own way. There was no time to change the systems since this law was only signed on 12/23/08, and is probably only for 2009. Of course, if the recession worsens, this could be extended for additional years, but we will not likely know that until very late this year.



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