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I have a friend that retired as a FERS employee from a federal agency 4 years ago. The agency where she had worked contacted her last year after her husband died and convinced her to come back to work for them as a full time permanent employee. To her everlasting misery, she made the mistake of believing the things they promised her and went back.
Well, suffice it to say they didn't live up to any of the promises they made her and she is now trying to figure out how to get herself out of this mess she created for herself. She worked herself nearly to death on forced overtime the past year and managed to pay off her house mortgage 5 years early.
Now, technically, she is already a federal retiree (returning to federal service didn't end her annuity; rather, they offset her salary dollar for dollar for her annuity). So, if she leaves, she wouldn't be retiring but rather resigning her position with the agency. She had been reading about the IRS exceptions to the 10% early withdrawal penalty for her Federal Thrift Savings Plan 401k and was thinking about setting up a 72t plan (probably what she should have done when her husband died, but didn't know she could have done it).
However, the way I see it, she doesn't need a 72t plan. She did retire, but resumed working for the same federal agency. She was covered under the same retirement system as before, FERS, and resumed participating in the federal Thrift Saving Plan 401k when she was rehired. She will attain age 55 in February of next year. I think that, if she resigns her position after the first of January 2023, the resignation would constitute a "separation from service in the year of age 55 attainment" and thus should allow her to begin penalty-free withdrawals from her TSP 401k plan.
Does anyone disagree with this assessment of the situation?
Thanks!
Steltek, thanks for bringing this idea to the forum, it's good for us all to remember there are other methods to access retirement funds. Your idea sounds logical, and would save your friend the effort and risk of a 72t. The retirement plan's documentation (SPD or something like that) will specify the details of their 55 and older rules for that specific plan. Hopefully your friend can have an honest conversation with the plan administrator to clarify her options. Good luck to her!
Tracy
