Exemption from Penalty for Early Distributions from Gov’t Plans Expanded

By ASPPA Net Staff • July 02, 2015 • 0 Comments
The exemption from the 10% penalty tax on early distributions from a government retirement plan for qualified public safety employees who are at least 50 years old has been expanded. The Defending Public Safety Employees’ Retirement Act, which President Obama signed into law on June 29, expands this exemption to include the following:

  • specified federal law enforcement officers;
  • customs officers;
  • border protection officers;
  • federal firefighters; and
  • air traffic controllers.
The measure eliminates the restriction that only distributions from government defined benefit plans would qualify for the exemption. Now, distributions from government defined contribution plans, as well as other kinds of plans, also qualify.

Under the new law, early distributions will not be treated as a modification of substantially equal payments for purposes of determining an increase in the penalty tax.

This law’s budgetary effects will not be entered on PAYGO scorecards under the Pay-as-You-Go Act of 2010.

The measure’s provisions apply to distributions made after Dec. 31, 2015.

Rep. David Reichert (R-Wash.) introduced the act on April 30. The House passed it on May 12, and the Senate passed its version on June 4; the chambers passed the reconciled version on June 18 and 24, respectively.