New bill makes changes to TSP

Reps. Elijah Cummings (D-Md.) and Mark Meadows (R-N.C.) on June 23 introduced legislation that would allow federal employees to make multiple age-based and post-separation withdrawals from their Thrift Savings Plan accounts, Federal Times reports. 

According to the report, the TSP Modernization Act of 2017 would remove restrictions that currently allow federal employees to make a withdrawal from their TSP account when the reach the age of 59 1/2 or allow retirees to make a single withdrawal of a portion of their account balance. 

Cummings said in a statement that the bill would better align the TSP with other retirement plans offered by the private sector and state and local governments as well as encourage participants to keep their TSP accounts to take advantage of low administrative fees even after they retire or separate from federal service, the article notes.

Reader comments

Wed, Jan 17, 2018

This is great, but wait 2 years? Are you joking? Seems like it took about two weeks to implement the sweeping tax overhaul. TSP has the audacity to mention that new forms need developed as to why it will take so long. Is there anyone else seeing red over this? I have developed and PEN tested Web sites. No way these changes should be allowed to take two years.

Thu, Aug 3, 2017

This is an excellent proposal. As a recent federal government retiree, this would give me the flexibility that I need to allow me to keep my money in the TSP and take it out when I want to and the way I want to. As it was, to avoid the one time only partial withdrawal, I took a loan from the TSP while I was still working and don't plan on paying it back now that I'm retired. This is not considered your one time partial withdrawal but will be a taxable distribution, which is fine with me. If this bill passes, we will have the ability to take multiple partial withdrawals, so a loan wouldn't have been necessary.

Sat, Jul 15, 2017 Lou Tampa, Fl

Judy, The change is that currently you can only make one initial partial lump sum withdrawal then you would have to withdraw your entire account if you need to make a second withdrawal or set up a monthly withdrawal option which you can change the amount only once a year. I also found out that if you opt to set up the monthly withdrawal first, it prohibits you from then taking a partial lump sum withdrawal. This bill is what the members need if they want to keep their money in the TSP which is what I would like to do but as others I am also considering moving a portion of my funds out of the TSP in order to gain the flexibility of access to my money. I don't know exactly what you are confused about. Most of us like the simplicity of the TSP as well as the low fees. You opted to withdraw all of your money which is your choice. I just hope that you are comfortable with managing your money elsewhere and are not paying exorbitant fees.

Wed, Jun 28, 2017 Judy Regan Los Angeles

I'm really confused. I don't see any change. When I turned 59 1/2 I took all my money out of TSP and invested it eleswhere. I was not penalized, I did not have to pay taxes, for I reinvested it. I don't see what this proposed bill is trying to change. Please advise.

Tue, Jun 27, 2017

Thank you Elijah Cummings and Mark Meadows. As a recent retiree, I want to make withdrawals when it is advantageous to do so. I found the withdrawal rules inadequate to manage and preserve funds. The scheduled withdrawals is likely to deplete the account more quickly than if account holder has control of withdrawals. I have written to the TSP about this a couple times but they seemed uninterested. So Thank You for the bill for the needed change.

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