Houston Municipal Pensions and a Gold IRA

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Short on time? The essentials

• Your monthly Houston pension is a lifetime annuity and is not eligible for rollover. Only lump-sum cash from a DROP, PROP, or a refund of member contributions can move to a gold IRA.
• HPOPS (police): governed by Vernon's Texas Civil Statutes Article 6243g-4. Members contribute 10.5 percent of pay. The DROP maximum is 20 years. Members with fewer than 10 years of service who leave can request a refund of member contributions without interest, and the city portion is never refunded.
• HFRRF (fire): governed by Article 6243e.2(1). Members contribute 10.5 percent of gross pay biweekly, pre-tax. Service retirement requires 20 years of pension service for members hired on or after July 1, 2017. The DROP maximum is 15 years.
• HMEPS (municipal): a governmental defined benefit plan created in 1943, with more than 25,000 participants. HMEPS states that any rollover-eligible payment carries the 20 percent federal mandatory withholding unless a direct rollover is elected.
• Under IRC Section 3405, a payment made to the retiree is subject to 20 percent mandatory federal withholding. A direct rollover to the receiving custodian avoids the withholding and the 60-day redeposit clock.
• Inside the self-directed IRA, cash buys IRS-approved bullion or coins meeting IRC 408(m)(3) fineness. Gold minimum purity is 99.5 percent; silver 99.9 percent; platinum and palladium 99.95 percent. The American Gold Eagle qualifies at 91.67 percent by statute.
• Texas has no state personal income tax under Article 8, Section 24 of the Texas Constitution. The state-run Texas Bullion Depository accepts IRA storage through Lone Star Tangible Assets, which received IRS approval as a nonbank trustee in 2023.
• Home storage of IRA metal is not allowed. The 2021 Tax Court ruling in McNulty v. Commissioner treats it as a full distribution.

See the Augusta Precious Metals gold IRA company checklistAugusta is our primary affiliate partner. The free checklist gives you a clean way to vet any provider you call about a Houston DROP or refund rollover.Print / save as PDF

On this page

• Houston's three pension systems in one map
• HPOPS: police mechanics that matter for a rollover
• HFRRF: fire mechanics that matter for a rollover
• HMEPS: municipal employees mechanics that matter for a rollover
• What Houston pension payments are eligible to roll
• The Houston-pension-to-gold-IRA rollover in eight steps
• Direct vs indirect: the 20 percent withholding rule
• The age 55 penalty exception and what happens when you roll
• What gold the IRA can hold
• Texas advantages: zero state tax and the Texas Bullion Depository
• HPOPS benefit percentage at a glance
• The gold IRA fee stack you will see
• Check whether your Houston pension distribution is eligible to roll
• Worked example: an HPOPS DROP retiree rolls a lump sum
• When rolling a Houston pension distribution into a gold IRA is a bad idea
• Houston pensions to gold IRA FAQ

Houston's three pension systems in one map

Houston is unusual among Texas cities: it does not participate in the Texas Municipal Retirement System. Houston has run its own systems since the 1940s. The three plans are separately governed, separately administered, and each has its own DROP, PROP, refund, and rollover paperwork.

Two mechanics show up in all three plans and drive the rollover question. Each system pays a monthly annuity for life, and that annuity is not eligible for rollover under IRS Publication 575. Each system also has a DROP, a Deferred Retirement Option Plan, that accrues a bookkeeping account balance during a member's late-career years. A DROP or PROP lump sum is where the rollover-eligible cash usually sits.

HPOPS: police mechanics that matter for a rollover

The Houston Police Officers' Pension System is governed by Vernon's Texas Civil Statutes Article 6243g-4, enacted September 1, 1999. That statute repealed the previous Articles 6243g-1 and 6243g-3 that governed the plan before consolidation. Every plan mechanic below traces back to the current version of Article 6243g-4 or to the HPOPS Summary Plan Description.

Member contributions are set by statute. All active members contribute 10.5 percent of pay since July 1, 2017. The prior rate was 10.25 percent, and before that 9.0 percent. Contributions are paid pre-tax through payroll deduction.

Benefit accrual has two tiers based on hire date. A member hired before October 9, 2004 accrues 2.75 percent per year for the first 20 years of credited pension service, then 2 percent per year. That tier is capped at 80 percent and floored at 55 percent.

A member hired on or after October 9, 2004 accrues 2.25 percent per year for the first 20 years, then 2 percent per year. That tier is capped at 80 percent and floored at 45 percent. The chart later in this article shows both schedules at 20, 25, and 30 years.

The DROP is available to members who have reached retirement eligibility. The maximum DROP period is 20 years. The DROP interest rate is set as 65 percent of the historical 5-year compounded average return, with a 2.5 percent floor and no upper cap. A PROP notional bookkeeping account is available at retirement, and DROP participants have a one-time option to elect PROP at that point.

A refund of member contributions is the exit for members who leave HPOPS with fewer than 10 years of credited pension service. That refund pays only the member contributions, without interest. The city portion is never refunded. A member has one year from termination to apply.

The refund can be issued as a direct rollover to a traditional IRA or to another eligible employer plan. It cannot go to a Roth IRA, a SIMPLE IRA, or a Coverdell ESA under the HPOPS Special Tax Notice.

HPOPS also allows a lump sum at retirement, capped at 20 percent of the member's annuity. Members hired before October 9, 2004 have an additional 5,000 dollar lump sum available at retirement. Both are one-time elections tied to the retirement paperwork.

HFRRF: fire mechanics that matter for a rollover

The Houston Firefighters' Relief and Retirement Fund is governed by Article 6243e.2(1) of Vernon's Texas Civil Statutes, titled "Firefighters' Relief and Retirement Fund in Municipalities of at Least 1,600,000 Population." The statute applies to Houston by population threshold.

Member contributions are 10.5 percent of gross pay, deducted biweekly, on a pre-tax basis. Service retirement for members hired on or after July 1, 2017 requires 20 years of pension service.

The DROP maximum is 15 years. The DROP interest rate is 65 percent of the 5-year average investment return, with a 2.5 percent floor and no cap. The rate resets every September 1, based on the trailing 5-year investment result.

HFRRF publishes four DROP distribution options at separation. A participant can take the DROP balance as a single lump sum. A participant can roll it directly to an IRA. A participant can roll it directly to another qualified plan. Or a participant can leave it in the fund and take up to four withdrawals per year. HFRRF states directly that the minimum federal income tax rate that must be withheld on a distribution paid to the member is 20 percent.

PROP is closed to new participants and closed to new contributions as of July 1, 2017. Members with existing PROP balances retain their accounts and their distribution options, but no additional PROP contributions are allowed. This is a hard change and affects members who joined after mid-2017.

Address for the fund is 4225 Interwood N Parkway, Houston, TX 77032, and the member service line is 281-372-5100. Rollover paperwork and the Special Tax Notice are available through HFRRF.

HMEPS: municipal employees mechanics that matter for a rollover

The Houston Municipal Employees Pension System is a governmental defined benefit plan, created in 1943, covering more than 25,000 participants. It covers the general Houston municipal workforce that is not sworn police or firefighter. HMEPS is administered by an elected board of trustees under state and city rules.

HMEPS has a DROP with a rollover-eligible payment option. Members who elect DROP participation build a notional balance that is available at separation as a lump sum, subject to plan rules. Plan-specific mechanics sit in the current HMEPS Benefits Handbook and plan document, not on generic HTML pages. That includes the current contribution rate, DROP interest rate, vesting period, and benefit accrual formula. Members should confirm the current numbers with HMEPS before filing paperwork.

HMEPS publishes the 20 percent federal mandatory withholding rule directly. Any rollover-eligible payment made to a member is subject to 20 percent federal income tax withholding under IRC Section 3405, unless the member elects a direct rollover to an eligible retirement plan. HMEPS distributes a Special Tax Notice with each rollover-eligible payment that walks through the same direct-versus-indirect choice covered later in this guide.

Contact for HMEPS is 1201 Louisiana, Suite 900, Houston, TX 77002, with member service reachable at 713.595.0100 or 800.858.1450. Members can request current Benefits Handbook language, DROP rules, and rollover paperwork directly.

What Houston pension payments are eligible to roll

The federal rule is the same for all three systems. IRC Section 402(c) defines an eligible rollover distribution as any distribution from a qualified plan, with narrow exclusions. The main exclusions are a series of substantially equal periodic payments over the life expectancy of the recipient and a required minimum distribution. A lump-sum DROP or PROP balance and a lump-sum refund of member contributions both meet the eligible-rollover definition. A monthly annuity does not.

The Houston-pension-to-gold-IRA rollover in eight steps

The mechanical sequence is the same whether the funding source is an HPOPS DROP lump sum, an HFRRF DROP lump sum, an HMEPS DROP lump sum, or a refund of member contributions from any of the three systems. The order does not change with the system.

1. Confirm the Houston pension distribution is eligible for rollover. A DROP or PROP lump sum and a lump-sum refund of member contributions are eligible rollover distributions. A monthly annuity is not.
2. Open a self-directed IRA. A precious-metals IRA requires a qualified non-bank trustee or self-directed IRA custodian. Equity Trust Company, STRATA Trust, and GoldStar Trust are commonly used with Texas accounts, and Equity Trust is the current custodian for storage at the Texas Bullion Depository.
3. Pick a gold IRA dealer. The dealer sources the metal and coordinates with the custodian. Verify the dealer partners with your chosen custodian and quotes tight spreads on common bullion coins and bars.
4. Request the appropriate plan paperwork. Contact your Houston system (HPOPS, HFRRF, or HMEPS) for the distribution or refund form and the Special Tax Notice Regarding Plan Payments. Each system uses its own paperwork.
5. Complete the rollover election. Enter the receiving custodian by name, "for the benefit of" your new IRA account number, and the amount to be rolled. Have the receiving custodian sign to certify the plan is eligible to receive the rollover.
6. Submit the paperwork and let the direct rollover fund the IRA. The check or wire is made payable to the custodian, not to you. No federal withholding applies. No 60-day clock runs.
7. Place the metal order. Once the cash arrives inside the new IRA, instruct the custodian to pay the dealer for IRS-approved bullion or coins meeting IRC 408(m)(3) fineness rules. The dealer ships to an IRS-approved depository, including the Texas Bullion Depository through Lone Star Tangible Assets.
8. File the right forms next April. The system issues Form 1099-R with distribution code G for a direct rollover. The receiving custodian issues Form 5498. Report the gross amount on Form 1040 line 5a with a taxable amount of zero on line 5b.

Direct vs indirect: the 20 percent withholding rule

Federal rollover mechanics offer two paths. A direct rollover sends the Houston pension cash from the plan straight to the receiving IRA custodian. No withholding applies. No 60-day clock starts. This is the default recommendation on any DROP, PROP, or refund rollover.

A payment made to the retiree instead triggers IRC Section 3405. HFRRF states directly that the minimum federal income tax rate that must be withheld on a payment to the member is 20 percent. HMEPS uses the same rule in its Special Tax Notice, and HPOPS attaches the same notice to the refund application.

The retiree then has 60 days to redeposit the full pre-withholding amount into the new IRA. The missing 20 percent has to come from personal savings during that window.

The 20 percent withholding is later credited against the federal tax bill at filing. If the retiree redeposited the full pre-withholding amount on time, the credit returns as part of the refund. If the retiree redeposits only the 80 percent that arrived, the missing 20 percent is treated as a taxable distribution. A 10 percent federal early-withdrawal penalty stacks on top for retirees under age 59 and a half unless an exception fits.

Failing the 60-day window has narrow relief. IRS Revenue Procedure 2016-47 and later guidance allow a self-certification waiver in a defined list of hardships, such as a plan administrator error or a serious illness. Do not plan on that safety net.

The age 55 penalty exception and what happens when you roll

IRC Section 72(t)(2)(A)(v) allows a penalty-free distribution from a qualified employer plan on a member who separates from service in or after the calendar year they turn 55. For a public-safety officer, IRC Section 72(t)(10) lowers that age to 50. HPOPS, HFRRF, and HMEPS are governmental qualified plans, and HPOPS and HFRRF members are qualified public safety employees.

A distribution taken directly from the pension system at the applicable age (55 for HMEPS, 50 for HPOPS and HFRRF public safety members) is not subject to the 10 percent federal early-distribution penalty. The distribution is still taxable federally.

The exception does not survive a rollover. Once the pension cash moves into an IRA, the IRA distribution rules apply. The 10 percent penalty reappears on any IRA withdrawal before age 59 and a half unless a different IRA-side exception fits.

Practical implication for a Houston officer separating between 50 and 59 and a half. If some of the cash is needed for living expenses within the next few years, keeping a portion of the account inside a different qualified plan preserves the public-safety-officer penalty-free path. Members who need short-term cash usually solve this through a next-employer 401(k), 403(b), or 457(b) if one is available.

What gold the IRA can hold

IRC Section 408(m) generally bans collectibles inside an IRA and then carves out an exception for bullion and certain coins that meet a fineness threshold. The gold floor is 99.5 percent purity. Silver is 99.9 percent. Platinum and palladium are 99.95 percent.

Two coins are named statutory exceptions inside the rule. The American Gold Eagle is IRA-eligible at 91.67 percent purity, which is 22-karat. The American Silver Eagle is IRA-eligible at 99.9 percent. Proof Eagles qualify when held in original mint packaging with the certificate.

Bars must come from a refiner or assayer approved by NYMEX, COMEX, LBMA, or produced by a national government mint. Common eligible names include PAMP Suisse, Credit Suisse, Valcambi, the Royal Canadian Mint, and the Perth Mint.

Common eligible coins include the American Gold Eagle by statute, the American Gold Buffalo at 99.99 percent, the Canadian Gold Maple Leaf at 99.99 percent, the Austrian Gold Philharmonic at 99.99 percent, and the Australian Kangaroo at 99.99 percent. The South African Krugerrand sits at 91.67 percent gold with no statutory exception, and it is not IRA-eligible.

Texas advantages: zero state tax and the Texas Bullion Depository

Two Texas features change the wrapper around a federal rollover.

Article 8, Section 24 of the Texas Constitution prohibits a state personal income tax. Any taxable IRA distribution, including a botched indirect rollover, a future required minimum distribution, or a partial cash retention from a Houston DROP or refund, is taxed at the federal level only. A Texas resident does not pay a state layer on top.

Texas also runs its own bullion depository. The Texas Bullion Depository is an agency of the State of Texas, authorized by House Bill 483 signed by Governor Greg Abbott on June 12, 2015. It has operated since 2017 on a purpose-built 10-acre campus in Leander, Texas, with Lone Star Tangible Assets LP as the depository contractor.

IRA storage is available at the depository. The Texas Bullion Depository states plainly that it is available for IRA storage through its operator LSTA, which received IRS approval as a nonbank trustee in 2023. Equity Trust Company is the first self-directed IRA custodian that works with the depository, and a Houston retiree can ask a gold dealer to coordinate delivery with Equity Trust.

Storage features published on the depository's site include a purpose-built high-security facility with 24/7 monitoring, insurance through Lloyd's of London, and segregated storage without commingling of client metal. IRA storage fees are negotiated between the custodian, the gold dealer, and the depository contractor. They can differ from the standard retail schedule.

HPOPS benefit percentage at a glance

The chart below shows the HPOPS benefit percentage schedule at 20, 25, and 30 years of credited pension service, for the two hire-date cohorts defined in Article 6243g-4. It is the pension value a member gives up if they leave with fewer than 10 years of service and take the refund of member contributions.

Two clarifications on the chart. Both cohorts accrue 2 percent per year after year 20, so both curves flatten toward the 80 percent statutory cap. And the pre-October-2004 cohort has a 55 percent minimum benefit at retirement, while the post-October-2004 cohort has a 45 percent minimum. A refund of contributions cancels every one of these benefit percentages and cannot be reversed after the one-year deadline runs.

The gold IRA fee stack you will see

HPOPS, HFRRF, and HMEPS do not charge a visible administration fee on a DROP lump sum or on a refund. The systems absorb those costs. A self-directed gold IRA carries its own fee stack, with several stacked line items the retiree pays directly.

The dealer markup is the line item with the widest range. Common bullion coins and bars carry tight spreads. Premium or proof coins marketed as exclusive or limited carry markups that can be several times higher. A clean Houston rollover is undone quickly if the metal is bought at a 25 or 35 percent markup over spot.

Check whether your Houston pension distribution is eligible to roll

Before calling a provider, confirm the Houston pension payment is actually eligible to roll under federal rules. The screening tool below walks through the eligibility questions and timing rules. It is a triage step, not legal or tax advice.

Can you roll your account into a gold IRA? Eligibility checker

Most retirement money can move into a gold IRA once it is an eligible rollover distribution. Pick your account and situation for a general answer. Always confirm the specifics with your plan administrator or custodian.

Account typeTraditional IRARoth IRASEP IRASIMPLE IRA401(k) or 403(b) from a former employer401(k) or 403(b) at your current employerGovernmental 457(b)Thrift Savings Plan (TSP)Pension lump sum or refund (after you separate) Your situationSeparated from that employerStill employed there, under 59 and a halfStill employed there, age 59 and a half or older

Check eligibility

General guidance only, not tax or financial advice. Eligibility depends on your specific plan document and IRS rules; confirm with your plan administrator and a tax advisor. A direct trustee-to-trustee transfer avoids the 60-day rule and 20% withholding.

Picking a company that explains every fee up front is the first step. Get the free gold IRA company checklist.

Worked example: an HPOPS DROP retiree rolls a lump sum

Your next step

If a Houston DROP, PROP, or refund rollover into a gold IRA looks like the right move, the highest-leverage action is to vet the provider before signing any pension distribution paperwork. Augusta Precious Metals is our primary affiliate partner and publishes a free gold IRA company checklist built for that vetting step.

Get the Augusta Precious Metals gold IRA company checklistSponsored link. Use it to evaluate any provider you call, including Augusta itself. Past performance is not a guarantee of future results.

When rolling a Houston pension distribution into a gold IRA is a bad idea

Houston pensions to gold IRA FAQ

Sources

1. Houston Police Officers' Pension System. Summary Plan Description. hpops.org. Checked July 2026.
2. Vernon's Texas Civil Statutes, Article 6243g-4 (HPOPS governing statute, enacted September 1, 1999). statutes.capitol.texas.gov. Checked July 2026.
3. Houston Firefighters' Relief and Retirement Fund. Public plan pages: DROP, PROP, contributions, and Special Tax Notice. hfrrf.org. Checked July 2026.
4. Vernon's Texas Civil Statutes, Article 6243e.2(1) (HFRRF governing statute). statutes.capitol.texas.gov. Checked July 2026.
5. Houston Municipal Employees Pension System. Public plan pages and FAQ, including federal withholding on rollover-eligible payments. hmeps.org. Checked July 2026.
6. Internal Revenue Service. Publication 575: Pension and Annuity Income. irs.gov/publications/p575. Checked July 2026.
7. Internal Revenue Service. Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs). irs.gov/publications/p590a. Checked July 2026.
8. Internal Revenue Service. Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs). irs.gov/publications/p590b. Checked July 2026.
9. Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions. irs.gov/retirement-plans. Checked July 2026.
10. Internal Revenue Service. Topic No. 413, Rollovers from Retirement Plans. irs.gov/taxtopics/tc413. Checked July 2026.
11. Internal Revenue Service. Topic No. 558, Additional Tax on Early Distributions from Retirement Plans. irs.gov/taxtopics/tc558. Checked July 2026.
12. Internal Revenue Code Section 402(c). Rollovers from qualified plans. uscode.house.gov. Checked July 2026.
13. Internal Revenue Code Section 401(a)(31). Direct rollover option. uscode.house.gov. Checked July 2026.
14. Internal Revenue Code Section 3405. Special rules for pensions, annuities, and certain other deferred income; 20 percent mandatory withholding. uscode.house.gov. Checked July 2026.
15. Internal Revenue Code Section 408(m). Collectibles rule and bullion exception. uscode.house.gov. Checked July 2026.
16. Internal Revenue Code Section 72(t)(2)(A)(v). Separation-from-service exception at age 55. uscode.house.gov. Checked July 2026.
17. Internal Revenue Code Section 72(t)(10). Public safety officer exception at age 50. uscode.house.gov. Checked July 2026.
18. United States Tax Court. McNulty v. Commissioner, 157 T.C. No. 10 (November 18, 2021). Home-storage IRA confirmed as a full distribution.
19. Texas Bullion Depository. IRA Storage Services. texasbulliondepository.gov. Checked July 2026.
20. Office of the Texas Comptroller of Public Accounts. Texas Bullion Depository overview. comptroller.texas.gov. Checked July 2026.
21. Texas Constitution, Article 8, Section 24. Prohibition on a state personal income tax. statutes.capitol.texas.gov. Checked July 2026.

By the Harry’s Coins Editorial team. Last reviewed July 2026.