How to Roll Over PERS Into a Roth IRA

The Public Employee Retirement System (PERS) maintains a 403b tax-sheltered annuity for eligible employees. When you leave your job, you have the option to roll over the assets into a self-directed IRA, either a Roth or Traditional IRA. The difference between the two is the tax structure, with Traditional IRAs allowing tax-deferred investment growth and Roth IRAs providing tax-free income at retirement. Moving into a self-directed IRA gives you more control over your investments, but you lose the ability to take unpenalized distributions at age 55 that is permitted with a PERS 403b plan.

Call your PERS plan administrator at the number located on your statement. Confirm whether you qualify for full or reduced benefits, which are determined by years of service and age.

Request a rollover package from the administrator.

Open a rollover IRA with a custodian offering investments that meet your retirement savings objectives. Banks, brokerage firms and insurance companies offer a wide range of IRA services. You may need to open a Traditional rollover IRA before converting the account to a Roth IRA. Let the custodian know you intend to convert the IRA to a Roth and complete any additional paperwork required.

Complete the rollover package for the PERS administrator. Request a direct rollover, with the money sent directly to the rollover IRA custodian. Direct rollovers keep money from coming to you first, which is called an indirect rollover and results in an automatic withholding of 20 percent in federal taxes.

Record the converted amount as income on your federal tax return (Form 1040, Line 15a). The IRS allows conversions completed by Dec. 31, 2010, to be recorded in tax filings in 2011 and 2012. Conversions after this date must be recorded in one tax filing.

Tips

  • If your PERS custodian does an indirect rollover, you must redeposit the PERS check plus the 20 percent withheld within 60 days to complete the rollover. You will need to use personal savings to restore the amount to a full 100 percent.

    If you are employed until age 50 and maintain your funds with PERS, the IRS allows you to access the money at age 55 without early-withdrawal penalties. This is unique to 403b plans and not allowed in IRAs or 401k plans.