House Passes Bill Exempting Some Feds From Retirement Tax Penalty

The House on Tuesday passed bipartisan legislation 407-5 that would allow federal law enforcement officers and firefighters to access money in their Thrift Savings Plan accounts without penalty when they are eligible to retire.

H.R. 2146 would reform the tax code so that federal law enforcement officers and firefighters, who are eligible to retire earlier than many other federal employees, aren’t subject to the 10 percent tax penalty on TSP retirement funds and other 401(k)-type plans tapped before the age of 59 and a half. Civilians who access their retirement investments, such as a 401(k), prior to turning 55 if they are retired, or 59.5 if they are still working, incur the IRS fine.

Federal law enforcement employees and firefighters are eligible to retire after 20 years of service at age 50; that group also is subject to mandatory retirement at age 57 because of the physical demands and hazardous nature of their jobs. Border protection and customs officers would also be exempt from the tax penalty under the bill.

State and local public safety officers have been exempt from the 10 percent tax penalty since 2006; H.R. 2146 would extend that exemption to qualified federal public safety employees. Rep. Dave Reichert, R-Wash., is a sponsor of the bill, along with Reps. Michael Fitzpatrick, R-Pa.; Bill Pascrell, D-N.J.; and Tom Reed, R-N.Y. Sens. Pat Toomey, R-Pa, and Michael Bennet, D-Colo., introduced a companion bill in that chamber in April.

Jon Adler, national president of the Federal Law Enforcement Officers Association, praised the lawmakers for shepherding the bill. “These leaders in Congress recognize the need for federal officers to be able to access their Thrift Savings Plan account at retirement age without incurring a harsh IRS penalty,” he said.

When it comes to the defined benefit portion of their retirement perks, law enforcement personnel receive a more generous annuity calculation and -- as mentioned -- can retire earlier than other federal workers.

A separate House bill, H.R. 1850, would extend law enforcement retirement coverage to Federal Protective Service officers, who are not considered LEOs for the purpose of calculating retirement benefits.

“FPS officers carry guns, make arrests, perform investigations, and apprehend criminals,” said David Wright, president of American Federation of Government Employees Local 918, in an April 20 press release, praising the legislation sponsored by Rep. André Carson “They are law enforcement officers in every sense of the word, and they should be entitled to law enforcement retirement benefits.”

(Image via Carolyn Franks / Shutterstock.com)