Federal law enforcement officers and firefighters on the cusp of retirement may be able to avoid an IRS early withdrawal penalty on their Thrift Savings Plan investments if a recently House passed bill becomes law.
The Defending Public Safety Employees’ Retirement Act passed the House on May 12 by a wide margin, with only five representatives voting against the measure.
The act would exempt federal workers involved in law enforcement and firefighting from being penalized the normal 10 percent IRS charge for withdrawing their TSP money before the age of 60.
Currently, federal workers must pay the early distribution tax penalty if they withdraw their TSP investments prior to what the IRS considers the normal retirement age — 60.
However in contrast to most of the federal workforce, federal law enforcement officers and firefighters can retire at age 50 after they have accrued 20 years of federal government service. Therefore, if they want to access their TSP investments, they must fork over 10 percent of the withdrawal to the IRS even though they are technically retired.
They are also forced by law to retire at age 57.
“This bill amends the Internal Revenue Code, with respect to the exemption from the 10% penalty tax on early distributions from a government retirement plan for qualified public safety employees who have reached age 50, to expand the exemption to include specified federal law enforcement officers, customs and border protection officers, federal firefighters, and air traffic controllers who similarly have reached age 50,” according to Section 2 of the act.
The bill, which is now before a Senate finance committee, was initiated by the Federal Law Enforcement Officers Association.
State and local law enforcement officials are already exempt from the early distribution penalty.
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