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I am a retired federal employee and live in NC. Is a withdrawal from the thrift savings plan covered by the Bailey Act?
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Retirement tax questions
It depends.
The exclusion applies if you had 5 or more years of creditable service as of 8/12/89. Defined benefit plans do include Federal Employees' Retirement System.
Thrift savings plans are considered retirement plans under the federal sector and would be included. Please see the attached for more details.
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Retirement tax questions
This is actually a maybe/maybe not situation for the TSP....for a TSP distribution to be eligible for exemption under Bailey, you had to be making contributions to the TSP before 12 Aug of 1989, and even then, it is possible that not all of the distribution is Bailey eligible. See the discussion in section 4 on pages 42 and 43 of the following NC tax bulletin for details to see if it affects you:
https://files.nc.gov/ncdor/documents/files/2019-Personal-Taxes-Bulletin.pdf
".....it is possible for a participant in the Federal Thrift Savings Plan to be vested as of August 12, 1989, in some components of the plan while at the same time not being vested in other components. "