Q. I’m retirement eligible for the FERS annuity and FERS annuity supplement. How does exercising the one-time TSP withdrawal affect the annuity supplement, if at all? The basis of this question comes from my understanding that TSP withdrawals are considered Earned Income from a federal/state tax perspective, which would subject the FERS Supplement to the income test.
A. TSP distributions are considered Ordinary Income, and not Earned Income. TSP withdrawals will not affect your FERS Supplement.