PERS Pretax Transfers
- General rules
- What pretax transfers can be accepted
- Not allowed under any circumstances
- Procedure for pretax transfers
- Who to contact
The ability to use a pretax transfer does not change or override any of the PERS or TRS statutes, regulations, rules or requirements as to the standards that must be met to pay on an indebtedness or purchase service. The use of pretax moneys is an additional possible payment source only, NOT a substitute for the requirements that allow for the payment of an indebtedness or the purchase of service. The transferring plan provider must allow the in-service or at termination direct plan-to-plan transfer. The payment must not be for more than the cost of the service at the time the payment is received. The Division will only attempt to return the full amount to the transferring plan if the indebtedness has already been paid in full or has been removed from your PERS/TRS account prior to receipt of the check from the transferring plan. If your pretax transfer amount exceeds the amount of your PERS/TRS indebtedness account(s) identified in Section B, the balance will be returned to you. The disbursement of that excess amount by the Division will be handled like any other refundable amount. The Division will withhold the required 20 percent federal tax from this excess amount or overpayment. In addition, depending on your age, you may be subject to the 10 percent early distribution penalty. If your transfer does not contain enough funds to cover the amount due at the time of receipt of the transfer check, the PERS or TRS will credit you with the transferred amount. You could receive an actuarial reduction to your benefit if you do not pay the remaining balance either through another transfer or with other funds.Any funds transferred from a tax-deferred plan will retain their tax-deferred status until paid as a monthly benefit payment or if refunded. The transferred funds will have the same tax liabilities as the plan they were transferred to. Therefore, should you eventually elect to take a refund and not a monthly benefit, the required 20% federal tax will be withheld. In addition, depending on your age, you may be subject to the 10% early distribution penalty.The Plan Document, statutes, regulations, and rules of the plan from which the money is transferred are not changed or overridden in any manner because the PERS or TRS can accept a pretax transfer source of money. For instance, in the Alaska Deferred Compensation, a 457(b) plan, a plan-to-plan transfer is allowed to pay an indebtedness. There is no Plan Document or IRS Code Section that allows the use of a stream of payments on a regular or other basis from one plan to another to pay an indebtedness or purchase service. That would be a periodic payment, not a transfer. The Internal Revenue Code requirements related to additional contributions are very strict and unyielding. Once the deduction is contracted for by the member it can not be changed under any circumstances. The deduction amount is irrevocable and can only be changed by conditions such as termination of employment.
Alaska Supplemental Annuity Plan and Alaska Deferred Compensation Plan pretax indebtedness transfers must total at least $200. Transfers from these plans of less than $200 will not be allowed. Transfers can occur up to twice a calendar year from each of these two plans.
What Pretax Transfers Can Be Accepted
Tax-deferred money from the following plans can be used to purchase service credit in the PERS and TRS as indicated; as allowed by the statutes of the specific plan. Such purchase can be done in most instances either in-service or at termination of employment.
- 401(a) Defined Benefit or Defined Contribution Plans
- Because of the wide range of 401(a) plans, you may be requested to provide specific detailed information such as a Plan document so that a proper determination as to allowability can be made.
- Such transfers, if allowed, may also be restricted as to at termination only.
- 401(k) Plan
- 403(a) Annuity Plan
- 403(b) Tax Savings/Sheltered Annuity
- 408(a) Traditional IRA
- 408(b) Individual Retirement Annuity
- 457(b) Governmental Deferred Compensation Plan
Not Allowed Under Any Circumstances
- Roth IRAs
- Simple IRAs
- SEP IRAs
- Coverdell Education Savings Account (ESA)
The Procedure for Pretax Transfers
Because of the requirement for only transferring that amount necessary, this will be handled on a "hands-on" basis. The Division has to determine the correct amount of the indebtedness BEFORE the member signs the form and submits it to their other plan provider.The process will work as follows:
- The Division of Retirement and Benefits, Accounting Section will prepare the base information, and send the member the form.
- The member signs the form to certify the request; it must be notarized.
- The member sends the form directly to their transferring plan provider to initiate the transfer. Their provider MUST also attest that the money is coming from an allowed plan.
- The provider sends the completed ORIGINAL form and the money to the Division of Retirement and Benefits, Accounting Section with their certification. If the check is received without the ORIGINAL form, the Division will attempt to contact the company or the member (if known) to request the form; however, we will only hold the check for 30 days before returning it to the issuing agency (it is the members responsibility that we receive the original form and the check timely).
- When the Division of Retirement and Benefits receives both the form and the money and when all is in order, the account is credited. If interest has posted to the indebtedness (last day of each month) during the time it takes the Division to receive and confirm that all is in order, that interest will be included in the balance due.
Who to Contact
You must call our office toll-free at (800) 821-2251 or in Juneau at (907) 465-4460 to start this paperwork.
Distributed by the Alaska Division of Retirement and Benefits
June 2002 and amended on November 26, 2002, December 8, 2004, December 28, 2004, March 28, 2006, November 28, 2006, October 5, 2007, June 26, 2008, and November 7, 2008.