New Withdrawal Penalty Exception for Public Safety Employees

New in 2016, public safety employees who separate from service in the year they reach age 50 or later may withdraw money from 401 defined contribution (DC) plan accounts without the payments being subject to a 10% early withdrawal penalty.

This exception has applied to distributions from governmental defined benefit (DB) plans since 2007. The new law expands the exception so it now applies to 401 defined contribution plan accounts, including any BackDROP dollars contained within that account.

As a reminder, any employee separated from service can withdraw money from the 457 account source without incurring the 10% early withdrawal penalty.

“Public Safety Employees” Defined
A public safety employee is an employee of a state or political subdivision of a state who provides police protection, firefighting services, or emergency medical services for any area within the jurisdiction of such state or political subdivision.

Please keep in mind that just because you can take penalty-free withdrawals doesn’t mean you should. Your retirement assets may need to last many more years, so you should take into account how withdrawals will impact your future retirement income.

For more information on this change, contact a participant service representative at 800-392-0925.