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TSP

Administered by the Federal Retirement Thrift Investment Board, this defined contribution plan for federal employees has roughly 4,614,874 participants, and over $358 billion in assets under management. Ask your TSP questions and post related topics here.

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Racter  
#1 Posted : Thursday, June 14, 2018 5:54:33 AM(UTC)
Racter

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As of HR 2146, Special Coverage Employees can start withdrawing their TSP at age 50. Until HR 2146 it was 55.

The wording of the Internal Revenue Code is the following - "in the year your reach your 50th birthday".

One person said that means in your 50th year of birth. You turn 49 June 14, 2018, and the next day begins your 50th year of birth. If you had 25 years of service and you were 49 years old and 1 day (June 15, 2018), you can withdraw your TSP.

Another person said, no, no, no. With the above scenario you can only start TSP withdrawals in the calendar year you reach your 50th birthday. In other words, the person in the example above will have to wait until January 1, 2019, to retire if he / she wants to withdraw TSP using the provisions of HR 2146.

Which is correct and what is the basis for your interpretation of the phrase, in the year you reach your 50th birthday.

Thanks so much.
TheRealOrange  
#2 Posted : Thursday, June 14, 2018 6:22:03 AM(UTC)
TheRealOrange

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Originally Posted by: Racter Go to Quoted Post
As of HR 2146, Special Coverage Employees can start withdrawing their TSP at age 50. Until HR 2146 it was 55.

The wording of the Internal Revenue Code is the following - "in the year your reach your 50th birthday".

One person said that means in your 50th year of birth. You turn 49 June 14, 2018, and the next day begins your 50th year of birth. If you had 25 years of service and you were 49 years old and 1 day (June 15, 2018), you can withdraw your TSP.

Another person said, no, no, no. With the above scenario you can only start TSP withdrawals in the calendar year you reach your 50th birthday. In other words, the person in the example above will have to wait until January 1, 2019, to retire if he / she wants to withdraw TSP using the provisions of HR 2146.

Which is correct and what is the basis for your interpretation of the phrase, in the year you reach your 50th birthday.

Thanks so much.

Interesting. The bill reads, "To amend the Internal Revenue Code of 1986 to allow Federal law enforcement officers, firefighters, and air traffic controllers to make penalty-free withdrawals from governmental plans after age 50, and for other purposes." Bold added.

This article says, "The Senate has joined the House in passing HR-2146, to allow penalty-free TSP withdrawals in any form for federal law officers, firefighters and air traffic controllers who retire at age 50 or later." Bold added. https://www.fedweek.com/...al-bill-clears-congress/

Racter  
#3 Posted : Thursday, June 14, 2018 7:13:54 AM(UTC)
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Thanks. You are correct about what they write about being age 50.

I left out an important part of my question. The purpose of HR 2146 was so special coverage employees (LEO etc) could avoid the early 10% withdrawal penalty at age 50.

The following is from TSP 535, Important tax Information:

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 (or the year you reach age 50 if
you are a public safety employee as defined in section
72(t)(10)(B)(ii) of the Internal Revenue Code)

See how it says above " the year you reach age 50) If you go to the Internal Revenue Code section they quote it also reads in the year you reach age 50. I've come across two interpretations of that "in the year you reach age 50" from two people I respect for their knowledge of these matters. I was trying to figure out which one is correct.

Thanks.
TheRealOrange  
#4 Posted : Thursday, June 14, 2018 7:20:31 AM(UTC)
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Originally Posted by: Racter Go to Quoted Post
See how it says above " the year you reach age 50) If you go to the Internal Revenue Code section they quote it also reads in the year you reach age 50. I've come across two interpretations of that "in the year you reach age 50" from two people I respect for their knowledge of these matters. I was trying to figure out which one is correct.

Thanks.

All of the articles I am reading seem to base the issue on the calendar year in which someone reaches age 50 or 55. So, if I reach age 49 or 54 in 2018 but will not reach age 50 or 55 until 2019, I think I would have to separate from the service (retire) in 2019 to take advantage of the exemption. I'll provide an update if I find anything definitive.

TheRealOrange  
#5 Posted : Thursday, June 14, 2018 7:54:50 AM(UTC)
TheRealOrange

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Originally Posted by: Racter Go to Quoted Post
See how it says above " the year you reach age 50) If you go to the Internal Revenue Code section they quote it also reads in the year you reach age 50. I've come across two interpretations of that "in the year you reach age 50" from two people I respect for their knowledge of these matters. I was trying to figure out which one is correct.

Thanks.

I think I'd tread lightly and use the most conservative reading of the language. The statutory language seems to require actually reaching the ages involved, and I think courts would look to the statutory language for defining the rule, although the regulations might be entitled to deference. Here is the statutory language:

26 U.S. Code § 72 - Annuities; certain proceeds of endowment and life insurance contracts

(t) 10-percent additional tax on early distributions from qualified retirement plans

(2) Subsection not to apply to certain distributions
Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions:

(A) In general
Distributions which are—

(v) made to an employee after separation from service after attainment of age 55,

********************

(10) Distributions to qualified public safety employees in governmental plans

(A) In general
In the case of a distribution to a qualified public safety employee from a governmental plan (within the meaning of section 414(d)), paragraph (2)(A)(v) shall be applied by substituting “age 50” for “age 55”.

It's the "after attainment of age 55 [or 50]" language that would give me pause.
waywardson  
#6 Posted : Friday, October 26, 2018 1:43:30 PM(UTC)
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I have an unusual question regarding HR 2146, maybe better to ask TSP directly but here goes:

I'm 48 years old - just resigned from Federal service as a 1811/Special Agent for medical reasons, have a pending disability retirement application with OPM. I noticed the language of the bill does not state that someone was receiving a LEO retirement, just that they would be allowed to receive the waiver of the 10% penalty at age 50. Wonder if I would qualify since I was an 1811?
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