Federal LEO retirement, TSP and the IRS


Q: Under FERS, federal LEOs can retire at age 50 (IRS Publication 721). There is an exception to the 10 percent early withdrawal penalty from a TSP account for “qualified public safety employees” (IRS Publication 575). If I wanted to take money out of the TSP to pay off my house when I retire at age 50 and leave the rest in the plan until later, I would be subject to the 10 percent penalty for early distribution. I understand that the exception is not automatic, in that the TSP will put code “1” (early distribution) in box 7 (type of distribution) of the 1099-R, and the recipient will need to claim, if eligible, the exception by filing IRS Form 5329. As a Federal Bureau of Prisons employee who is eligible to retire at 50 under federal LEO provisions, do I qualify for the exception from the 10 percent penalty or are Federal Bureau of Prisons employees excluded from the exception?

A: This exception does not apply to defined contribution plans like the TSP.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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