Exclusive Q and A on Transferring CSRS Voluntary Contributions Program to A Roth IRA or An IRA

By on December 17, 2010 in Retirement with 10 Comments

Do you have questions about the CSRS Voluntary Contributions Program? If so, you are not alone.

The CSRS Voluntary Contributions Program (VCP) is an excellent benefit for CSRS and CSRS Offset federal employees. One of the great ways to use this program is to max-fund an IRA.

But very few people really understand the VCP and how to get the most out of it.

I get questions from federal employees across the country about the Voluntary Contributions program. They want help understanding the VCP and on how to transfer their VCP to an IRA, particularly a Roth IRA. I have received so many questions about how to transfer the VCP to an IRA, that I have written a book detailing the entire process:

The Best Kept Secret in CSRS: How You Can Use the CSRS Voluntary Contributions Program to Put Away Money for Retirement.

In Chapter 5, I answer the most common questions I get about the VCP to IRA Transfer.

Here is an exclusive excerpt from my new book for FedSmith.com Readers:

Question: Do I have to transfer my VCP to a traditional IRA, and then convert to a Roth IRA? Or can I convert my VCP directly to a Roth IRA?

Answer:

You can choose to move your VCP money directly to a Roth IRA if you want.

Years ago, the VCP withdrawal forms did not mention Roth IRAs, but the forms were updated in 2010. You can now move your VCP contributions and/or your VCP interest directly to a Roth IRA.

Do remember that just because you *can* transfer your VCP money directly to a Roth IRA, doesn’t mean that you eligible to do so based on IRS rules.

Be sure to review the section in Chapter 2, Roth IRA Basics.

Question: I plan to retire with 35 years of service, with all my career step-increases, COLA’s and whatever else, how do I find my base pay for each of my 35 years of service?

Answer: If you want to find out your EXACT base pay, I would recommend contacting your HR for assistance. But before you do that, consider looking at your Medicare Wages on your Social Security statement. This can help you get a good ballpark idea.

And if you want to contribute more than that amount, then it is worth your time to find out your EXACT base pay and contribution limit.

Check out the section in Chapter 1 on How Do I Find Out How Much I Can Contribute? for more information.

Question: When is the best time to withdraw and transfer my VCP? At retirement, or before I retire?

Answer: In most cases, I would recommend filing your VCP transfer paperwork *BEFORE* you retire.

Most VCP transfers go smoothly. But if you have a problem, it is almost always easier to get things resolved while you are still employed. Also, interest stops accruing on your VCP as soon as you retire.

Some people have experienced a delay in receiving their VCP refund when they processed it with their retirement, and were disappointed to learn that they were not receiving interest during the time OPM was straightening things out. If they had filed their paperwork a few months before retirement and still experienced a delay, at least they would have been earning interest on the money while OPM was getting things in order.

Check out the section in Chapter 3 on When… When is the Best Time to Transfer Your VCP? for more information.

Question: How Long Does the Entire Transfer Take?

Answer: It’s impossible to predict exactly how long *your* transfer will take. What I can tell you is that I’ve been able to help clients do everything from open a VCP, fund it and complete the transfer in as little as 30 – 40 days.

Now that was my ‘record.’ I had my client call me when they turned in their SF 2804 to their HR, so I could answer any questions HR had right away. We also used express mail service to send in their withdrawal paperwork.

While that was my ‘record’, most clients took much longer. Why? Not everyone is in a hurry to do the transfer, and often, they wanted to fund their VCP over a longer period of time. However, when we did experience delays, it was typically when we were trying to open a VCP.

If their HR wasn’t familiar with the VCP, it took extra time to contact their HR and explain the program so we could get the client’s paperwork processed. The good news for many of my clients is that once I explained the VCP to their HR, any time I had clients in that same agency who later wanted to open a VCP – everything went much faster because the HR was now familiar with the VCP.

So, if you’re the first person in your agency to open a VCP (which is not uncommon!) – you will probably spend extra time talking with your human resources office just to get them to process the paperwork to open your VCP.

If you happen to have a great HR department, and they’re familiar with the VCP, things can move a lot faster. If your HR is familiar with the VCP, you’re on the ball, and you don’t encounter any troubles with your transfer, it is not unreasonable to get everything done (open, fund and transfer) within 60 days.

While opening a VCP usually takes extra time, withdrawing the money is often much smoother. Since the withdrawal paperwork is sent directly to OPM, we haven’t encountered the same types of delays. I have heard that OPM has occasional backlogs with processing VCP withdrawals, and that withdrawals over $75,000 are subject to extra review. However, I’ve done withdrawals over the $75,000 marker for various clients, and we often see the check sent out within 2 weeks of submitting the form.

If you’d like to learn more about the VCP, and how to transfer it to an IRA or Roth IRA, visit my page on CSRS Voluntary Contributions, The Best Kept Secret in CSRS.

© 2016 Micah Shilanski, CFP®. All rights reserved. This article may not be reproduced without express written consent from Micah Shilanski, CFP®.

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About the Author

Micah Shilanski is a Certified Financial Planner™ professional who specializes in helping federal employees get the most out of their retirement benefits. Micah helps his clients with tax planning, retirement planning, federal retirement planning, estate planning, and investment advice.

Plan Your Federal Retirement is a dba of Shilanski & Associates, Inc., an Alaska Registered Investment Advisor, with securities offered through Summit Brokerage Services, Inc., Member FINRA/SIPC.

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