President signs bipartisan law that lets federal cops and firefighters access TSP funds without tax fee when they are eligible to retire.
This story has been updated.
Beginning in 2016, federal law enforcement officers will be able to access money in their Thrift Savings Plan accounts without penalty when they are eligible to retire.
President Obama on Monday signed the Defending Public Safety Employees’ Retirement Act into law, which reforms the tax code so that federal law enforcement officers and firefighters, who are eligible to retire earlier than many other federal employees, aren’t subject to the 10 percent tax penalty on TSP retirement funds and other 401(k)-type plans tapped before the age of 59 and a half. Border protection and customs officers and air traffic controllers would also be exempt from the tax penalty under the new law, which applies to distributions made after Dec. 31, 2015.
Civilians who access their retirement investments, such as a 401(k), prior to turning 55 if they are retired, or 59 and a half if they are still working, incur the IRS fine.
Federal law enforcement employees and firefighters are eligible to retire after 20 years of service at age 50; that group also is subject to mandatory retirement at age 57 because of the physical demands and hazardous nature of their jobs.
State and local public safety officers have been exempt from the 10 percent tax penalty since 2006; H.R. 2146 extends that exemption to qualified federal public safety employees. The House passed the bill on May 12, and the Senate approved it on June 24.
Rep. Dave Reichert, R-Wash., sponsored the bill, along with Reps. Michael Fitzpatrick, R-Pa.; Bill Pascrell, D-N.J.; and Tom Reed, R-N.Y. Sens. Pat Toomey, R-Pa, and Michael Bennet, D-Colo., introduced companion legislation in that chamber.
Jon Adler, national president of the Federal Law Enforcement Officers Association, earlier praised the lawmakers for shepherding the bill. “These leaders in Congress recognize the need for federal officers to be able to access their Thrift Savings Plan account at retirement age without incurring a harsh IRS penalty,” he said.
The American Federation of Government Employees also lauded the change. “Federal law enforcement officers have been unfairly penalized because of this law, but that will change starting next year,” said AFGE Legislative Director Beth Moten.
When it comes to the defined benefit portion of their retirement perks, law enforcement personnel receive a more generous annuity calculation and -- as mentioned -- can retire earlier than other federal workers.