Relaxing TSP Withdrawal Rules

Legislation Relaxing TSP Withdrawal Rules, which could impact every federal employees has been proposed.  Bill S.873 under the TSP modernization Act (Senators Rob Portman and Tom Carper) on April 6th has been designed to simplify TSP withdrawals.

Relaxing TSP Withdrawal Rules
Image Credits

The Latest Changes and Relaxing TSP Withdrawal Rules

According to a press release regarding this, Senators Carper and Portman introduced this legislation Relaxing TSP Withdrawal Rules. An article discussing these changes in the Thrift Savings Plan had been published earlier in the TSP investment report of FEDweek. The Thrift Board announced two years ago that it was planning to give some relaxation to federal employees for withdrawing the money by making the restrictions more flexible. Attempting to encourage participants to leave their retirement assets in the TSP upon retirement appears to be the main reason behind this strategy.

New legislation allows multiple Age-based withdrawals

As per the new legislation Thrift Savings Plan participants would be allowed withdrawals on multiple age-based levels.  For employees who have reached age of 59.5 have been eligible to carry out only one age-based withdrawal up until now. The second important thing to know about this plan is that it would introduce the chance for separate participants to take multiple partial withdrawals. It will be a better idea in comparison to the current status when it allows only one partial withdrawal.

TSP introduces periodic payment rules

The third item covered under this legislation are changes in periodic payment rules. The legislation has announced monthly or quarterly types of periodic TSP withdrawals / payments. The amount can be changed anytime and participants who would be able to elect a partial withdrawal according to its comfort. Participants who are taking periodic payments would be allowed to stop payment and leave the balance in their account. These rules regarding withdrawal of payment will offer much relaxation to participants in comparison to the current ones under which they could only do periodic payment on the monthly basis; they had only one chance annually to change the amount of payment; they couldn’t stop paying until the withdrawal of the full amount of the plan.

Participants and IRA Rollovers

Participants may be happy to find out that they will be able to be more selective in their decisions regarding IRA rollovers.  All these changes in TSP seem beneficial to participants with additional questions arising from the introduction of new legislation. The first thing to be taken into consideration is whether the thrift savings plan is currently capable of handling and managing the expected additional transactions. Secondly, the increase in the expense of a plan has been estimated to be noteworthy. The larger number or withdrawal request will almost certainly add to the management expense of the TSP as a whole, which has been a major advantage of the plan.  Would TSP be able to tolerate the increase in the number of transactions? Thirdly, the financial services sector may choose to fight this legislation as it may reduce the number of IRA rollovers from the TSP.

Conclusion – The amended legislation relaxing TSP withdrawal rules appears to be good news for participants of the plan.  The reality about these changes is yet to come, however, and added costs could be the final outcome.

Related Posts

Americans with a DC Plan more Optimistic about Retirement Savings

Americans with a DC Plan more Optimistic about Retirement Savings

A new survey has revealed that the Americans who have a DC plan are more

Read More


Qualifying for Medicare

Qualifying for Medicare

Working for 10 years under a Medicare covered employment provides you with the 40 credits, previously called quarters, needed to qualify. On average, an employee earns 4 credits per year of employment, accumulating 40 credits in 10 years.


Medicare Advantage

Medicare Advantage

What Federal and Postal Employees must know about Medicare Advantage