TSP Modernization Act Enters Law
With the TSP Modernization Act now passing the final hurdle, a signature from President Trump, it will be entered into law which means federal employees will be assisted from the changes to the Thrift Savings Plan (TSP). After sponsoring the bill and supporting it from the very beginning, Senator Rob Portman (R-OH) noted his pleasure at seeing it become law this week.
In a recent interview, Portman said how this was a ‘common-sense bill’ and one that has been coming for some time. Not only will it allow more flexibility in retirement for all federal employees, it makes the whole TSP ‘more responsive’ to the unique and ever-changing needs of the participants.
Previously, only one partial-age withdrawal was allowed after the age of 59 1/2; one partial withdrawal was also allowed after separating from federal employment. For the longest time, experts and participants have noted their displeasure at this lack of flexibility and it has meant that most federal employees take their money with them after leaving employment.
With these changes, the restraints are removed because withdrawals are unlimited regardless of age and regardless of whether they’re still employed by the government. If you’re over 59 1/2 and still working, you’ll be allowed several age-based withdrawals. For those who have left the employment of the federal government, they can also take numerous post-separation withdrawals. In addition to these major changes, there can also be an election of quarterly or annual payments; these periodic withdrawals can be adjusted at any time.
As you can see, the new law really does allow for flexibility and the hope is that more money will stay in TSPs and therefore the system. After President Trump’s signature, the law will direct the Federal Retirement Thrift Investment Board (FRTIB) and they’ll take the necessary steps to ensure TSPs are ready for the changes within two years.
Whether you’re a federal employee or were previously under their employment with a TSP, this is likely to be the news you’ve been waiting for. Especially for the latter category, there’s now no requirement for those aged over 70 1/2 to choose a withdrawal scheme and empty the account. After waiting for changes like this for some time, knowing a change is coming within two years is great news for all!