Q. I was wrongfully terminated from federal service in 2010. The case was settled out of court, after seven months. During that time I was no longer in Civil Service and could not legally contribute to my TSP and, seeing I had no income, I removed my TSP so that I could continue to pay bills and maintain my mortgage. I was 50 years old at the item of the wrongful termination, I have paid the required taxes, but now I am subject to the penalty due to no fault of my own. As part of the agreement with the Air Force, they paid me my back pay. I secured employment elsewhere during the seven months of ligation. Is it possible to get relief from the penalty? I really had no choice.
A. There is no exception to the early withdrawal penalty for anything you’ve mentioned in your description. You may want to consult a CPA to be sure, however.