Exceptions to Tax on Early Distributions

Relief association service pension distributions are subject to income tax, and may be subject to an additional ten-percent tax. Generally, amounts an individual withdraws before reaching age 591/2 are called “early” distributions. Individuals must pay an additional ten-percent early withdrawal tax unless an exception applies.

An exception to the early withdrawal tax exists for public safety employees of a state, or political subdivision of a state, who separate from service during or after the year the employee reaches age 50. 

Relief association members who elect to receive their service pension distribution directly, rather than roll it over to an Individual Retirement Account, should consult with their financial advisor as they may qualify for the exception to the early withdrawal tax.

Additional information about exceptions to the tax on early distributions can be found on the Internal Revenue Service website.

Published last in the May 2020 Pension Newsletter