:cheesy:In an earlier blog by Ian Smith, it was reported that legislation (H.R. 2146) allowing Special Category Employees to take distributions from the Thrift Savings Plan without penalty if they separate from service in the year in which they turn 50, or later, had passed both Houses of Congress. It was added to the “Bipartisan Trade Priorities and Accountability Act of 2015.”The Act was signed into law today.
Here’s what H.R. 2146 means for Law Enforcement Officers (LEOs), Firefighters (FFs), Customs and Border Protection Officers (CBPOs) and Air Traffic Controllers (ATCs):
Beginning with TSP withdrawals made after 12/31/2015, LEOs/FFs/CBPOs/ATCs will be able to withdraw funds from the TSP in the amount of their choosing as long as they separated from federal service during the year in which they attained the age of 50. This is similar to the current “age 55 rule,” in that your funds must remain at the TSP until age 59 ½ for you to take advantage of this new law. If a LEO/FF/CBPO/ATC retires at age 50 and transfers their TSP funds to another custodian, they will lose the benefit of this legislation. Under the “age 55 rule” one has to work into their 55th year of birth and retire to benefit from the rule. Under this new law, a LEO/FF/CBPO/ATC is eligible for the benefit when they retire in their 50th year or later. The law only specifically mentions these four categories of employees. Other FERS participants and other Special-Category employees do not qualify under the Act.
Remember, under this Act, your funds MUST stay at the TSP for you to take advantage of the new law. You cannot retire at age 50, transfer your funds from the TSP to another custodian, and receive this benefit.
If you are a LEO/FF/CBPO/ATC who retires (or have retired) before age 50, the new law will NOT benefit you. If you retire/retired before age 50, then you will still have the same option as you have now, which is a withdrawal methodology under Section 72(t) of the Internal Revenue Code. You will have to continue this withdrawal methodology for whichever is longer – five years, or reaching the age of 59 ½.
The new law is also written to benefit LEO/FF/CBPO/ATCs who are already taking payments from the TSP in the form of a life-expectancy withdrawal or other Section 72(t) withdrawal methodology. If you retired in your 50th year of age and are currently taking a life-expectancy withdrawal, you can change over to an amount of your choosing under the new legislation and it will NOT be considered a change of methodology. Normally, any change away from the life-expectancy-based payments would trigger the 10% penalty on all monies you’d withdrawn. In addition, a whole new option opens up for these folks: the LUMP-SUM Payment.
Here’s a recent press release from the TSP:
Information for Federal Public Safety Employees — (June 25, 2015) H.R. 2146, the Defending Public Safety Employees’ Retirement Act, passed the Senate on June 24, 2015 and was sent to the President for his signature. This bill amends the Internal Revenue Code to allow specified federal law enforcement officers, customs and border protection officers, federal firefighters, and air traffic controllers who separate from service in or after the year they turn age 50 to make a withdrawal from the TSP without incurring a 10% early withdrawal penalty. The effective date of H.R. 2146 is December 31, 2015.
I’m interpreting this to mean that the TSP will use or acquire your retirement code from OPM and know to issue a Form 1099 with the correct distribution code to let the IRS know this is not an early withdrawal subject to penalty.
This change occurred primarily because of because of the work done by the Federal Law Enforcement Officers Association (FLEOA). You can find out more about FLEOA at http://www.fleoa.org.
LEOs, there's still time to register for an open enrollment pre-retirement seminar conducted by Dan Jamison. It will be held on Thursday, July 23 at the Columbus Club in Arlington VA. Spend all day getting valuable information from a former Agent who knows all there is to know about Law Enforcement Retirement. Continental breakfast and deli lunch are provided. Register at fersguide.com.
- See more at: http://www.fedsmith.com/2015/06/29/...wal-penalty-becomes-law/#sthash.ez1jFgsI.dpuf
