Rollover Rules: Federal Employee Retirement Taxes (2025 IRS Guide)
This guide covers “Rollover Rules” within federal employee retirement taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.
Adapted from Publication 721 (2025), Tax Guide to U.S. Civil Service Retirement Benefits, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.
Context for these rules
This part of the publication is for retirees who retired on nondisability retirement.
.If you retired on disability before you reached your minimum retirement age, see Rules for Disability Retirement and Credit for the Elderly or the Disabled under Part III, later. However, on the day after you reach your minimum retirement age, use the rules in this section to report your disability retirement and begin recovering your cost..
Rollover Rules
If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can generally defer tax on the distribution by rolling it over to another qualified retirement plan, a traditional IRA, or, after 2 years of participation in a SIMPLE IRA sponsored by your employer, a traditional SIMPLE IRA under that plan. You don’t include the amount rolled over in your income, and you can’t take a deduction for it. The amount rolled over is taxed later as the new program pays that amount to you. If you roll over amounts into a traditional IRA or traditional SIMPLE IRA, later distributions of these amounts from the traditional IRA or traditional SIMPLE IRA don’t qualify for capital gain treatment or the 10-year tax option. However, capital gain treatment or the 10-year tax option will be restored if the traditional IRA or traditional SIMPLE IRA contains only amounts rolled over from a qualified plan and these amounts are rolled over from the traditional IRA or traditional SIMPLE IRA into a qualified retirement plan. To qualify for capital gain treatment or the 10-year tax option, the plan participant must have been born before January 2, 1936.
You can also roll over a distribution from a qualified retirement plan into a Roth IRA or, after 2 years of participation in a SIMPLE IRA sponsored by your employer, a Roth SIMPLE IRA under that plan. Although the transfer of a distribution into a Roth IRA or Roth SIMPLE IRA is considered a rollover for Roth IRA purposes, it isn’t a tax-free transfer unless you are rolling over amounts from Roth contributions and earnings. See Rollovers to Roth IRAs, later, for more information.
Rollovers to SIMPLE IRAs.
You can roll over amounts from a qualified retirement plan or an IRA into a SIMPLE IRA as follows.
During the first 2 years of participation in a SIMPLE IRA, you may roll over amounts from one SIMPLE IRA into another SIMPLE IRA.
After the first 2 years of participation in a SIMPLE IRA, you may roll over amounts from a SIMPLE IRA, a qualified retirement plan, or an IRA into a SIMPLE IRA.
Qualified retirement plan.
For this purpose, a qualified retirement plan is generally:
A qualified employee plan,
A qualified employee annuity,
A tax-sheltered annuity plan (403(b) plan), or
An eligible state or local government section 457 deferred compensation plan.
Distributions eligible for rollover treatment.
If you receive a refund of your CSRS or FERS contributions when you leave government service, you can roll over any interest you receive on the contributions. You can’t roll over any part of your CSRS or FERS annuity payments.
You can roll over a distribution of any part of your TSP account balance except:
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A distribution of your account balance that you choose to receive in (typically monthly, but not less frequently than annually) payments over:
Your life expectancy,
The joint life expectancies of you and your beneficiary, or
A period of 10 years or more;
A required minimum distribution generally beginning at age 73;
A deemed distribution because of an unrepaid loan, if you haven’t separated from government service (see Outstanding loan under Thrift Savings Plan, earlier); or
A hardship distribution.
In addition, a distribution to your beneficiary isn’t generally treated as an eligible rollover distribution. However, see Qualified domestic relations order (QDRO), Rollovers by surviving spouse, and Rollovers by nonspouse beneficiary, later.
Direct rollover option.
You can choose to have OPM or the TSP transfer any part of an eligible rollover distribution directly to another qualified retirement plan that accepts rollover distributions or to a traditional IRA, SIMPLE IRA, or Roth IRA.
There is an automatic rollover requirement for mandatory distributions. A mandatory distribution is a distribution made:
Without your consent; and
Before you reach age 62 or normal retirement age, whichever is later.
No tax withheld.
If you choose the direct rollover option or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. However, if the rollover is to a Roth IRA, you may want to choose to have tax withheld because any amount rolled over is generally included in income. Any part of the eligible rollover distribution paid to you is subject to withholding at a 20% rate. Direct rollover amounts from Roth contributions and earnings don’t have tax withheld because you already paid tax on those amounts.
Payment to you option.
If an eligible rollover distribution is paid to you, OPM or the TSP must withhold 20% for income tax even if you plan to roll over the distribution to another qualified retirement plan, or traditional, SIMPLE, or Roth IRA. However, the full amount is treated as distributed to you even though you actually receive only 80%. You must generally include in income any part (including the part withheld) that you don’t roll over within 60 days to another qualified retirement plan or to a traditional IRA or traditional SIMPLE IRA. Rollovers to Roth IRAs are generally included in income. Eligible rollover distributions that are from Roth contributions don’t have tax withheld because you already paid tax on those amounts.
If you leave government service before the calendar year in which you reach age 55 and are under age 59½ when a distribution is paid to you, you may have to pay the 10% additional tax on any part, including any tax withheld, that you don’t roll over. If you separate from service before the calendar year in which you reach age 55 (or before the earlier of age 50 or completing 25 years of service under the plan if you are a qualified public safety employee), it may be subject to an additional 10% tax on early distributions. See Roth TSP balance, earlier. Also, see Tax on Early Distributions in Pub. 575.
Exception to withholding.
Withholding from an eligible rollover distribution paid to you isn’t required if the distributions for your tax year total less than $200.
Partial rollovers.
A lump-sum distribution may qualify for capital gain treatment or the 10-year tax option if the plan participant was born before January 2, 1936. See Lump-Sum Distributions in Pub. 575. However, if you roll over any part of the distribution, the part you keep doesn’t qualify for this special tax treatment.
Rolling over more than amount received.
If you want to roll over more of an eligible rollover distribution than the amount you received after income tax was withheld, you will have to add funds from some other source (such as your savings or borrowed amounts).
Example.
You left government service at age 53. On February 3, 2025, you receive an eligible rollover distribution of $10,000 from your TSP account, which is from traditional contributions and earnings. The TSP withholds $2,000, so you actually receive $8,000. If you want to roll over the entire $10,000 to postpone including that amount in your income, you will have to get $2,000 from some other source and add it to the $8,000 you actually received.
If you roll over only $8,000, you must include in your income the $2,000 not rolled over. Also, you may be subject to the 10% additional tax on the $2,000.
Time for making rollover.
You must generally complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution.
The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. There are three ways to obtain a waiver of the 60-day requirement.
You qualify for an automatic waiver.
You self-certify that you met the requirements of a waiver.
You request and receive a letter ruling under the appropriate IRS Revenue Procedure. This Revenue Procedure is generally published in the first Internal Revenue Bulletin of the year.
A letter ruling isn’t required if a financial institution receives the rollover funds during the 60-day rollover period, you follow all procedures required by the financial institution, and, solely due to an error on the part of the financial institution, the funds aren’t deposited into an eligible retirement account within the 60-day rollover period.
Frozen deposits.
If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended. An amount is a frozen deposit if you can’t withdraw it because of either:
The bankruptcy or insolvency of the financial institution, or
Any requirement imposed by the state in which the institution is located because of the bankruptcy or insolvency (or threat of it) of one or more financial institutions in the state.
The 60-day rollover period is extended by the period for which the amount is a frozen deposit and doesn’t end earlier than 10 days after the amount is no longer a frozen deposit.
Qualified domestic relations order (QDRO).
You may be able to roll over tax free all or part of a distribution you receive from the CSRS, the FERS, or the TSP under a court order in a divorce or similar proceeding. You must receive the distribution as the government employee’s spouse or former spouse (not as a nonspousal beneficiary). The rollover rules apply to you as if you were the employee. You can roll over the distribution if it is an eligible rollover distribution (described earlier) and it is made under a QDRO or, for the TSP, a qualifying order.
A QDRO or qualifying order is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights. The payments must be made to a spouse, former spouse, child, or other dependent of a participant in the plan.
The order must contain certain information, including the amount or percentage of the participant’s benefits to be paid to each payee. It can’t require the plan to pay benefits in a form not offered by the plan, nor can it require the plan to pay increased benefits.
A distribution that is paid to a child or dependent under a QDRO or a qualifying order is taxed to the plan participant.
Rollovers by surviving spouse.
You may be able to roll over tax free all or part of the CSRS, FERS, or TSP distribution you receive as the surviving spouse of a deceased employee or retiree. The rollover rules apply to you as if you were the employee or retiree. You can generally roll over the distribution into a qualified retirement plan or an IRA. An amount rolled over to a Roth IRA isn’t tax free unless you are rolling over amounts from Roth contributions and earnings. See Rollovers to Roth IRAs, later.
A distribution paid to a beneficiary other than the employee’s surviving spouse is generally not an eligible rollover distribution. However, see Rollovers by nonspouse beneficiary next.
Rollovers by nonspouse beneficiary.
You may be able to roll over tax free all or a portion of a distribution you receive from the CSRS, FERS, or TSP of a deceased employee or retiree if you are a designated beneficiary (other than a surviving spouse) of the employee or retiree. The distribution must be a direct trustee-to-trustee transfer to your IRA that was set up to receive the distribution. The transfer will be treated as an eligible rollover distribution and the IRA will be treated as an inherited IRA. An amount rolled over to a Roth IRA isn’t tax free. See Rollovers to Roth IRAs, later. For information on inherited IRAs, see Pub. 590-A.
How to report.
On your Form 1040, 1040-SR, or 1040-NR, report the total distributions from the CSRS, FERS, or TSP on line 5a. Report the taxable amount of the distributions (total distribution less the amount rolled over) on line 5b. Also, check box 1 for “Rollover” on line 5c.
If the rollover was made to a Roth IRA, see Rollovers to Roth IRAs, later, for reporting the rollover on your return.
Written explanation to recipients.
The TSP or OPM must provide a written explanation to you within a reasonable period of time before making an eligible rollover distribution to you. It must tell you about all of the following.
Your right to have the distribution paid tax free directly to another qualified retirement plan or to a traditional IRA or traditional SIMPLE IRA.
The requirement to withhold tax from the distribution, unless it is from your Roth contributions and earnings, if it isn’t directly rolled over.
The nontaxability of any part of the distribution that you roll over within 60 days after you receive the distribution.
Other qualified retirement plan rules that apply, including those for lump-sum distributions, alternate payees, and cash or deferred arrangements.
How the distribution rules of the plan to which you roll over the distribution may differ in their restrictions and tax consequences from the rules that apply to the plan making the distribution.
Note:
Rollovers to Roth IRAs aren’t tax free and are included in income unless it is from your Roth contributions and earnings. See Rollovers to Roth IRAs, later.
Reasonable period of time.
The TSP or OPM must provide you with a written explanation no earlier than 90 days and no later than 30 days before the distribution is made. However, you can choose to have the TSP or OPM make a distribution less than 30 days after the explanation is provided, as long as the following two requirements are met.
You have the opportunity, for at least 30 days after the explanation is provided, to consider whether or not you want to make a direct rollover.
The information you receive clearly states that you have the right to have 30 days to make a decision.
Rollovers to Roth IRAs
You can roll over distributions directly from the CSRS, FERS, and TSP to a Roth IRA.
You must include in your gross income distributions from the CSRS, FERS, and TSP that you would have had to include in income if you hadn’t rolled them over into a Roth IRA. You don’t include in gross income any part of a distribution that is a return of contributions that were taxable to you when paid. In addition, the 10% additional tax on early distributions doesn’t apply.
Any amount, which is from traditional TSP contributions and earnings, rolled over to a Roth IRA or Roth SIMPLE IRA is subject to the same rules for converting a traditional IRA into a Roth IRA. For more information, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1 of Pub. 590-A.
How to report.
A rollover to a Roth IRA isn’t a tax-free distribution unless you are rolling over after-tax contributions you made such as your Roth contributions and earnings. Report a rollover from a qualified retirement plan to a Roth IRA on Form 1040, 1040-SR, or 1040-NR, lines 5a and 5b.
Enter the total amount of the distribution before income tax or deductions were withheld on Form 1040, 1040-SR, or 1040-NR, line 5a. This amount is shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. From that result, subtract the amount of any qualified rollover from a designated Roth account. Enter the remaining amount, even if zero, on Form 1040, 1040-SR, or 1040-NR, line 5b.
.If you must include any amount in your income, you may have to increase your withholding or make estimated tax payments. See Pub. 505..
Choosing the right option.
Table 1 may help you decide which distribution option to choose. Carefully compare the effects of each option.
Table 1. Comparison of Payment to You Versus Direct Rollover
| Affected item | Result of a payment to you | Result of a direct rollover |
| Withholding | The payer must withhold 20% of the taxable part. | There is no withholding. However, you may want to choose withholding on a rollover from your traditional contributions and earnings to a Roth IRA. |
| When to report as income | Any taxable part (including the taxable part of any amount withheld) not rolled over is income to you in the year paid. | Any taxable part isn’t income to you until later distributed to you from the new plan or IRA. However, see Rollovers to Roth IRAs, earlier, for an exception. |
| Additional Tax | If you are under age 59½, a 10% additional tax may apply to the taxable part (including an amount equal to the tax withheld) that isn’t rolled over. | There is no 10% additional tax. See Tax on early distributions, earlier. |
Using the guidance
Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.
Sources and further reading
- Publication 721 (2025), Tax Guide to U.S. Civil Service Retirement Benefits: Rules for Retirees — Rollover Rules — Internal Revenue Service; 2025 edition.
The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.