The Thrift Savings Plan (TSP) recently issued guidance on an additional category of public safety employees who are eligible for an exemption from the 10% early withdrawal penalty as a result of Section 329 of Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE 2.0).
The Defending Public Safety Employees' Retirement Act of 2015 allows 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 withdraw funds from their TSP without incurring a 10% penalty (See Bulletin 15-4, Public Safety Employees’ Exemption to the Early Withdrawal Penalty.)
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 December 29, 2022. (See Bulletin 23-3, SECURE Act 2.0, Section 329: Modification of Eligible Age for Exemption from Early Withdrawal Penalty for Qualified Public Safety Employees.)
TSP Eligibility Determination
The TSP will treat participants who meet the criteria below as eligible for the exemption from the 10% early withdrawal penalty:
- Employees identified by their employing agencies as public safety employees through the “P” code
AND - determined by the TSP to have separated during or after the year they turn 50 (based on their date of birth) OR have at least 25 years of service between their TSP service computation date and their “P” Employment Code date corresponding to their date of separation, both received from the payroll agencies.
Employees with questions about this new policy and should contact TSP directly.