Bill Exempting Some Feds From Retirement Tax Penalty Heads to Obama

A bill that will allow federal law enforcement officers to tap into their retirement savings at age 50 without penalty is now headed to President Obama’s desk.

The Senate passed the measure on Wednesday, after trade provisions had been attached to it, clearing the last hurdle before it could go to the White House.

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 Thrift Savings Plan 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 Internal Revenue Service 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.

If Obama signs H.R. 2146, the changes will take effect on Dec. 31. 

(Image via  Lightspring / Shutterstock.com)