The TSP told agencies that they are responsible for deciding whether an individual qualifies as a public safety officer and for notifying the TSP of that status. Image: shutter2photos/Shutterstock.com
By: FEDweek StaffThe TSP has called to the attention of federal agencies a change in tax policy for distributions from accounts of public safety officers after they separate from federal service under the “Secure 2.0” law enacted late last year.
“Prior to SECURE 2.0, the Defending Public Safety Employees’ Retirement Act of 2015 allowed specified federal law enforcement officers, customs and border protection officers, federal firefighters, and air traffic controllers (“public safety employees”) who separate from service during or after the year they turn age 50 to make a withdrawal from the TSP without incurring a 10% early withdrawal penalty, says a notice.
“Section 329 of SECURE 2.0 extends this exception of the 10% early withdrawal penalty to public safety employees with at least 25 years of federal service in a TSP-eligible position at the time of separation. This provision is effective for distributions made after the date of enactment of this Act (December 29, 2022),” it says.
The TSP told agencies that they are responsible for deciding whether an individual qualifies as a public safety officer and for notifying the TSP of that status. If agencies fail to do so, the individual still could claim an exemption to the early withdrawal penalty by filing a Form 5329 with the IRS, it said.
The Secure 2.0 law also made a number of other changes to tax policies affecting the TSP and other 401(k)-type accounts, including increasing effective this year from 72 to 73 the starting age for required minimum distributions for retirees, and exempting Roth balances from that requirement prior to the participant’s death. Other changes, including several involving additional “catch-up contributions” for workers age 50 and older and a further increase in the required minimum distribution age to 75, will not take effect until future years.
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