A Retirement Planning Provision Hidden in a Trade Bill | Ed Slott and Company, LLC

A Retirement Planning Provision Hidden in a Trade Bill

By Jeffrey Levine, IRA Technical Expert
Follow Me on Twitter:
@IRAGuru4EdSlott

On June 29, 2015, President Obama signed two major trade bills into law; the Trade Preference Extension Act of 2015 and the Trade Priorities and Accountability Act of 2015. What does a trade bill have to do with retirement accounts? Well, buried deep inside one of the bills was a provision expanding the “Age 50 Exception” to the 10% early distribution penalty, beginning in 2016. Because, you know, where else would you expect to find changes to the law affecting retirement accounts than in a trade bill?

So what is the "Age 50 Exception" anyway, and what changes were made by the law? Here’s what you need to know in a nutshell.

  • The current "Age 50 Exception" allows certain state and local public safety workers, such as police, firefighters and emergency medical service (EMS) workers, to take penalty-free distributions from their government-sponsored defined benefit plans – like a pension plan – if they have separated from service in the year they turn age 50 or later.
  • Under the new law, more public safety workers will qualify for the exception. In addition to the state and local public safety workers who already qualify for the exception, certain federally employed public safety workers will also qualify. This will include certain federal law enforcement officers, firefighters, border protection officers, customs officers and air traffic controllers.
  • Under the new law, the exception is expanded to cover distributions from more plans. While under the current rules, the exception only applies to distributions from government-sponsored defined benefit plans, the changes will allow penalty-free distributions to be taken from both defined benefit plans and defined contribution plans, like 403(b) plans.
  • The changes to the age 50 exception are not effective until 2016. The “old” rules will continue to remain in effect throughout the remainder of 2015.
     

Receive expert IRA and tax planning articles straight to your email. Subscribe here.


Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to matt@irahelp.com for approval.

For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at matt@irahelp.com or (516) 536-8282 with any questions.

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.