If you retire from under the FERS special provision for federal law enforcement employees at age 50 with 20 years of service or 25 years of service any age and you receive a 1099r with code 2 in Box 7, you are eligible to take a TSP distribution without the 10% penalty and are taxed on the distribution for Federal purposes.
Please clarify for Pennsylvania tax purposes this 1099r. From the State Information that I have read, the Box 7, code 2 is an early withdrawal with exception. Since this is an eligible plan by meeting PA's listing of what constitutes eligible and the years of service and age are met as defined by the plan, is the entire distribution exempt from Pennsylvania State Taxes? I feel that it is, but I am reading conflicting information regarding having to calculate the tax on the part of the distribution that does not include the Pennsylvania taxed contributions that were put into the plan but you would have to figure out the portion of the withdrawal that was contributed by the Federal Government and the Earnings that made up the withdrawal. I understand that this would need to be done if this was truly and early withdraw not meeting the retirement requirements. Would someone be able to let me know if I am correct in my thinking for the taxation treatment of the specified withdrawal?
