Participants in the Thrift Savings Plan are one small step closer to getting more options with the TSP.
House Oversight and Government Reform Committee Ranking Member Elijah Cummings (D-Md.) and Government Operations Subcommittee Chairman Mark Meadows (R-N.C.) introduced the TSP Modernization Act of 2017.
It’s the companion bill to the legislation Sens. Tom Carper (D-Del.) and Rob Portman (R-Ohio) introduced in April.
The legislation would let federal retirees make multiple age-based and post-separation withdrawals from the TSP. Under current law, participants in federal service can make only one withdrawal from the TSP upon reaching age 59-and-a-half. TSP participants who have left federal service can also withdraw a portion of their account balance only once.
Besides giving them the option of making multiple withdrawals, the legislation would let TSP participants:
Revise the timing and amounts of periodic payments,
Give them the option of combing partial withdrawals or taking an annuity with periodic payments and,
Eliminate automatic annuities as the default option if participants don’t elect an alternative.
“Ultimately, this bill comes down to one simple principle: providing greater flexibility for federal employees,” Meadows said in a statement. “It will give TSP recipients more access to their own funds, and, over the long term, allow them the opportunity to continue taking advantage of benefits similar to those available throughout the private sector after federal service.”
The Federal Retirement Thrift Investment Board, which administers the TSP, worked with Carper and Portman to get the bill introduced.
“A number of our participants are really starting to withdraw or think about their withdrawal options, and they are very frustrated by our current, statutory options,” said Kim Weaver, director of the external affairs for the FRTIB, at its April meeting. “Members are very responsive to that. They understand that it’s an issue that directly impacts people.”
The American Federation of Government Employees, National Active and Retired Federal Employees Association and National Treasury Employees Union all support the legislation.
In a letter of support, AFGE cited $182 billion in pay freezes, furloughs, sequestration and higher employee retirement contributions that federal workers have contributed since 2010.
“Nonetheless, federal employees save for retirement and pay into their TSP accounts,” AFGE Legislative Director Thomas Kahn wrote in a June 20 letter to House Oversight and Government Reform Committee leadership.
The bill “not only gives federal employees more flexibility and a better opportunity to manage their financial future, but also creates more incentive for federal employees and retirees to keep their money in the TSP, rather than roll it over to more expensive private financial plans.”
The FRTIB in 2014 surveyed participants who withdrew funds, and more than 50 percent of them said they’d like to access additional funds from the TSP to address certain life events.