Question

Public Safety Employee? Penalty?

Forum|Forum|3 years ago
February 1, 2023
1 reply
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I am about to retire from a gov agency after 33 years. I am with the Aviation Security and Public Safety department, We fall under SDCERS and have a DROP program. I will be 57 at the time of retirement. With regard to my DROP program. Am I considered a Public Safety Employee? Because I will only be 57 and not 59 1/2 years old. Will I have to pay the 10% tax penalty or as a Public Safety Employee will I be exempt from the 10% penalty if I take the money out of the DROP program? If I am exempt what do I need to prove it to the IRS and retirement agency. Thank you

Not A Product Question

M

MAK70

Yes, you should qualify for the penalty waiver- you need to file a certification with the DROP administrator who will adjust your 1099-R to correctly show your status.

The Pension Protection Act waives the 10% tax on early withdrawals made to “qualified public safety employees” who separate from service during or after the year they attain age 50. The Internal Revenue Service defines
“qualified public safety employee” as “any employee of the State or political subdivision of a State whose principal duties include services requiring specialized training in the area of police protection, fire-fighting services, or
emergency medical services for any area within the jurisdiction of such State or political subdivision.”

S

scot1966Author

MaryK4

Thank you for your help. You mention filing a certification with the DROP administrator who will adjust my 1099-R. Is this certification something I have to take to them or something they would already have available to themselves.

Thank you for your time

D

DianeW777

Deferred Retirement Options Plans (DROPs) should have the information they need to properly reflect your retirement payments as penalty free. The codes you want to see in Box 7 of your Form 1099R is either a 7 or a 2. It's likely they will enter it as a 7, which means normal distribution which is penalty free.

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