Leaving Your Money in the TSP

Chapter 6: Section 5

Note; The required minimum distribution requirement was suspended for calendar year 2020 by P.L. 116-136 of March 27, 2020, retroactive to the beginning of the year. The policies below applied in prior years and will apply again starting in 2021 unless the suspension is extended.

After you leave federal service, you can leave your entire account balance (as long as it is $200 or more) in the TSP until April 1 of the calendar year after you reach age 72 or the year following the year you separate from federal service, if later, subject to the restrictions described below. (Note: The threshold age was 70 1/2 for those who reached that age before the end of calendar year 2019).

Those requirements apply to both traditional and Roth balances, for those who have both.) You can continue to change the way your money is allocated among the TSP investment funds by making interfund transfers.

You do not need to submit any forms until you are ready to make a withdrawal election, unless you are subject to required minimum distributions as explained below. When you are ready to choose a withdrawal, contact the TSP ThriftLine or site for current tax information and withdrawal forms.

Submit Form TSP-99, Withdrawal Request for Separated and Beneficiary Participants, available only online at www.tsp.gov/forms/civilianForms.html.

Restrictions on Leaving Your Money in the TSP

TSP participants who want to leave their investments and earnings in a TSP account should keep the following rules in mind:

Automatic Cashout—If when you leave service your account balance is less than $200, your account will be automatically paid to you in a single payment; if the amount is less than $5, it will be forfeited.

Investments, Loans and Court Orders—You cannot make any additional investments into your account after you leave federal service, and you can no longer borrow from your account. If you have an outstanding loan at the time you separate, it must be repaid or a taxable distribution will be declared on any portion that is taxable on withdrawal. Until the loan is closed, you will not be able to make a withdrawal. In addition, you must resolve any court orders against your account before you can make a withdrawal.

Required Minimum Distributions—If you do not withdraw your account balance or begin receiving payments from your account by April 1 of the year following the year you become age 72 (70 1/2 for those who reached that age before the end of calendar year 2019) or the year following the year you separate from federal service, if later, the TSP is required to make a required minimum distribution (note: effective in September 2019, a former requirement to make a full withdrawal decision by that date no longer applies; account holders now are never required make a full withdrawal election).

A minimum distribution will be calculated based on your account balance and your age, using the IRS Uniform Lifetime Table. The TSP will notify you before this situation applies to you and send you the notice Important Tax Information about your TSP Withdrawal and Required Minimum Distributions.

If you are separated and receiving installment payments from your TSP account when you turn 72 (70 1/2 for those who reached that age before the end of calendar year 2019), your payments will be used to satisfy the minimum distribution requirement. If the total amount of your payments does not satisfy the requirement, the TSP will issue a supplemental payment for the remaining amount in December of that year.

The minimum distribution payment cannot be transferred or rolled over. This means that if you withdraw your account in a single payment or installment payments in a year to which the required minimum distribution rule applies, you cannot transfer the entire payment(s) to an IRA or an eligible employer plan. Instead, before transferring any money, the TSP will calculate your required minimum distribution amount and send it to you.

For detailed rules regarding minimum distributions, see the TSP publication Required Minimum Distributions, available through the ThriftLine and www.tsp.gov/forms/

2021 Digital Almanac

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