Pension Protection Act of 2006

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L1: Pension Protection Act of 2006I am a retired Firefighter age 51. I retired at age 50 with a Defined Benefit pension and a separate tax deferred fund that I rolled into the State of Florida Investment Plan (sort of a state version of a 401K). The fund is a Deferred Retirement Option Program (DROP) whereby up to five years of an employee”s retirment contributions are diverted to an annuity. Section 828 of The Pension Protection Act of 2006 provides an exemption from the 10% penalty on distributions before age 59-1/2 for retired public safety employees who are in defined benefit plans. No one, including the IRS, is able to tell me whether Section 828 permits me to take distributions from my DROP without using a SEPP or paying the 10% early withdrawl penalty. 72T is clearly designed to address distributions from defined contribution plans (not defined benefit plans), so it”s logical to assume the legislative intent was to provide an exemption for public safety personnel to apply to their IRAs or 457 plans. Can anyone shed some light on this?2008-04-09 12:50, By: SteveJ, IP: []
L2: Pension Protection Act of 2006Try>> Their experts may have more experience in this area.2008-04-09 16:58, By: dlzallestaxes, IP: []

L2: Pension Protection Act of 2006Unfortunately, this PPA does not allow a person to take distributions from a DROPw/o a 10% penalty (in your example) since once it”s rolled out of the state account, it is now in a defined contribution plan of it”s own. Section 828 only gives the FF a “one time” opportunity to take proceeds directly from the DROP account before rolling it anywhere. An option on your DP-PAYT form when you retired.
Distributions from 457 plans are exempt from the 10% penalty once a person retires AND separates from service, regardless of age. 457”s are one of the only “4” plans (401k, 403b, etc) that allow this. However, do not think that if you roll DROP into a 457, it gives you any more liquidity. They are still two seperate buckets, even if they are rolled together. the 457 providers are just now realizing this.
Hope this helps….

2008-04-09 17:58, By: Fenton, IP: []

L2: Pension Protection Act of 2006I am also a fire fighter soon to be retired from the FRS and I”ve done extensive research on the topic. Fenton”s answer is exactly right. Some additional info for our brothers and sisters taking the investment plan payout; unfortunately, the Pension Protection Act doesn”t cover defined contribution plans (our investment plan), which means even as a public safety employee, you have to wait until the year you turn 55 in order to withdraw money penalty free after rolling the investment plan payout into your 457 plan. Fenton, is that your understanding as well?2008-04-10 11:20, By: Outa here, IP: []