Federal law-enforcement employees often face a dilemma when considering retirement. Because of the nature of the work they do, many are eligible to retire at age 50. But they might have to wait as long as 10 years to access their retirement accounts without a penalty.
Unlocking retirement funds could get easier for federal law enforcement officers, however, under a House bill introduced earlier this month by Reps. Dave Reichert (R-Wash.) and Bill Pascrell (D-N.J.).
The bipartisan proposal would reform federal tax law so that federal law- enforcement officers and firefighters can access funds from their 401(k)-style Thrift Savings Plans when they’re eligible to retire without facing a penalty.
Currently, law-enforcement feds can retire at age 50 as long as they have 20 years of service. However, if they withdraw funds from their TSP accounts before the age of 59 1/2, they have to pay a 10 percent penalty.
In 2006, Congress approved the Pension Protection Act, which allowed state and local law-enforcement officials to access retirement-saving accounts without penalty as long as they were eligible for retirement.
But it excluded federal law-enforcement officers, which “put us at, obviously, an economic disadvantage,” said Jon Adler, national president of the Federal Law Enforcement Officers Association, in an interview on In Depth with Francis Rose.
FLEOA: A ‘glaring’ inequity that needs to be fixed
Adler called the current penalties on early withdrawal “very formidable,” since they come on top of the regular taxes retirees already have to have pay when they withdraw funds from their TSP accounts.
“The whole idea about us being eligible to retire at age 50 is the nature of our work,” Adler said. “We are public-safety officers .. so that’s why it’s important when we are eligible to retire, we can access our money. I mean, Lord knows, our pensions aren’t the greatest, so we need to draw upon other financial means.”
The Internal Revenue Service has issued inconsistent guidance on the extent to which the 2006 law covers federal law-enforcement employees, Adler said, leading the group to push for legislation.
“It’s just one of those glaring inequities that needed to be addressed and fixed,” Adler said.
The bill’s co-sponsors, Reichert and Pascrell, are the co-chairs of the House Law Enforcement Caucus. That, and the fact that the legislation has garnered support from both sides of the aisle, has raised the group’s hopes that the measure could be “fast-tracked,” Adler said.