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10.11: Paying off a TDP agreement early - rules

10.11: Paying off a TDP agreement early - rules

Employees are only permitted to pay off or pay down an existing tax-deferred payment (TDP) agreement if they are terminating within 90 days or if they have a retirement application on file at ORS. This can be done with either pretax or post-tax dollars.

For the lump-sum payment to qualify as a pretax purchase, the lump sum must be withheld as a deduction from the employee's gross wages, and the employee cannot have constructive receipt of the payment. The employee must have applied for retirement or must terminate within 90 days of the payment's submission to ORS, provided the employee and the employer have completed both Payoff Payment Options for a TDP Agreement (R0518C) and TDP Payoff Worksheet (R0718C). The TDP plan is the only way a pretax payment can be made through the employer, and all lump-sum payments must be included on the reporting unit's retirement detail report as DTL3 records.

Unlike the regularly scheduled deductions, these lump-sum payments can be paid from money that is not reportable toward retirement. Bonus, incentive, and unused sick and annual leave payments are examples of such monies that could be lump-sum payments and have TDP deductions against them. This change in policy to accept lump-sum payments through TDP does not alter how an employee's final average compensation (FAC) figure is computed. Nonreportable compensation payments will not be used to calculate FAC.

If an agreement is not paid in full, the agreement's monthly payment terms will continue until the agreement is paid off or employment with the reporting unit ends.

Last updated:  02/27/2012