Q. I stopped work in March 2009. I applied for OWCP. The Office of Workers’ Compensation Programs had paid for two back surgeries in 1989 and 1991 and continues to pay for ongoing treatment. I was denied OWCP, so I applied for disability retirement, which was approved. I am still on interim retirement pay. I withdraw some funds from my Thrift Savings Plan to cover me for the time period between OWCP and retirement. I now need to withdraw more for medical reasons. Since I am medically disabled from my federal position, as well as medically retired, what is the best way to withdraw my Federal Employees Retirement System TSP monies?
A: From the notice posted at https://www.tsp.gov/PDF/formspubs/octax92-32.pdf:
“If you receive a TSP distribution before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any portion of the distribution not transferred or rolled over. The additional 10% tax generally does not apply to payments that are:
* Paid after you separate from service during or after the year you reach age 55;
* Annuity payments;
* Automatic enrollment refunds;
* Made as a result of total and permanent disability;
* Made because of death;
* Made from a beneficiary participant account;
* Made in a year you have deductible medical expenses that exceed 7.5% of your adjusted gross income;
* Ordered by a domestic relations court; or
* Paid as substantially equal payments over your life expectancy.”
The TSP cannot certify to the Internal Revenue Service that you meet these exemption requirements when your taxes are reported. Therefore, you must provide the justification to the IRS when you file your taxes.
