New TSP Bill Adds More Withdrawal Options for Federal Workers and RetireesNovember 14, 2017 / by admin
New TSP Bill Adds More Withdrawal Options for Federal Workers and Retirees
The U.S. Senate passed a new TSP bill this week and it is now heading for President Donald Trump’s desk. If signed into law, federal workers who’ve signed up for the Thrift Savings Plan will have additional withdrawal options and more flexibility in their accounts.
This legislation, called the TSP Modernization Act, passed through the Senate with a unanimous vote. This comes just one month after the House of Representatives passed the bill. Now it is ready for the president to sign into law if he so chooses. But even if he does sign it into law, the effects won’t take place right away.
Starting in February of next year, the Federal Retirement Thrift Investment Board will reportedly be finished with establishing all the guidelines for withdrawals. They first began writing the guidelines back in September, out of the expectation that the legislation will get signed into law. Their original focus for the guidelines was regarding the withdrawals for post-separation, source-specific, and in-service.
The FRTIB wants benefits delivered to participants as quickly as possible. However, they’re not 100% confident about what is going to happen because the guidelines and requirements are still being worked out. But the agency is going to be contacting participants of the TSP and let them know when the new changes to their plan will be in effect.
For all the ex-federal employees, they are currently only allowed a single partial post-separation withdrawal. They can choose to receive an annuity payment, one lump-sum payment, or monthly payments. Once the new TSP bill is signed into law, participants can make multiple partial post-separation withdrawals and set the timing of them based on their particular needs.
Federal workers over 59 ½ years of age who are still employed can have several age-based withdrawals.
Participants of TSP can receive their payments either quarterly or yearly. If they want to alter the amount of the withdrawal payment, they can do so whenever they want. They can put a stop to their periodic payments too while just letting their existing balance remain on their TSP. Also, participants who schedule ahead of time for periodic payments can either buy an annuity or have a partial withdrawal.
The election deadline for TSP withdrawals will be eliminated under the TSP Modernization Act. The way it is right now, retired TSP participants who are over 70 ½ years old have until April 1st to choose when to take the post-separation withdrawal. This month refers to the year in which they first meet both of the requirements just mentioned.
The FRTIB has acknowledged how anxious the participants of TSP are to have more freedom when it comes to their withdrawals.
TSP participants took part in a survey recently about how satisfied they were with their current withdrawal options. Many of them said they were not satisfied. Roughly 62% indicated they liked the flexibilities proposed and about 74% of current participants want to transfer funds within a decade after their retirement to another plan from their current accounts. These 74% claim they want to look someplace else for better flexibility. About 85% of participants who are separated want to transfer funds to accounts which offer a lot more choices.
In a partnership between the FRTIB and Gallup, there was a special survey conducted with roughly 39,000 of the participants of TSP. They only received answers from 6,725 of those people. Out of this number, 89% of them claimed to be extremely satisfied or at least satisfied with the current overall way in which TSP works.
A request was recently released by the FRTIB in which they wanted to propose having a manager for the Fixed Income Index Investment Fund (also known as the F Fund).
As of October 2017, there was $28.2 billion worth of assets in the F Fund. This fund tracks and analyzes the Barclays Capital U.S. Aggregate Bond Index.
The F Fund and the other funds of TSP are managed by BlackRock. According to the new contract, the term will be for 1-year and it will have four options that are yearlong.
For help with your own TSP, be sure to contact a financial professional.