Current and retired federal workers will soon have a whole lot more options when it comes to withdrawing funds from their TSP account. Below is a quick reference of what will take place; your options below the change, the short transition period, and what options will be available to you when the new rules go into effect.
All changes being made to your TSP withdrawal options (associated with the passage of the TSP Modernization Act – PL 115-84) are beneficial to both federal employees still in-service and those who have retired. This is an absolute gain of benefits to our feds.
These changes will go into effect on September 15th, 2019.
From Now through September 6th:
- Age-based Withdrawals: There can only be one age-based withdrawal allowed for employees who are at least 59 ½. If you take an age-based withdrawal, participants are not allowed to take a partial withdrawal after separation.
- Partial Withdrawals After Separation: If you didn’t take a withdrawal while employed, you can take only one after separation. Only one full withdrawal is allowed after a partial withdrawal has been taken.
- Monthly Payments: After separation, once you begin taking monthly payments, you cannot stop, though of course you can still “cash out”. You’re not allowed to take a partial withdrawal once you’ve begun taking monthly payments. You can change the amount of payment only during the annual open season.
- Proportional Withdrawals: If your TSP is made up of both traditional and Roth balances, any withdrawals must be taken equally between the two balances.
NOTE: For a full list of details about withdrawal options available before the law passed, see the TSP booklet that applies to your situation: Withdrawing Your TSP Account After Leaving Federal Service or In-Service Withdrawals. Starting September 15th, those same withdrawal options will be available in addition to those described here.
Transition Period (September 7th – September 14th):
There will be a brief transition period between September 7th and September 14th to finish processing withdrawal requested received prior to when the new rules go into effect. Since previous options will still be available to you, it may be to your benefit to wait until after September 15th to make your request, taking advantage of more options and flexibility.
NOTE: If you need to withdraw money before the TSP changes take effect, your properly completed request must receive by 11:59 p.m. on September 6, 2019.
From September 15th and Moving Forward:
- Age-based Withdrawals: Employees who are at least 59 ½ can take up to four age-based withdrawals per year. Taking an age-based withdrawal while employed will no longer affect your ability to take a partial withdrawal after separation.
- Partial Withdrawals After Separation: Regardless of whether you took an age-based withdrawal while employed, there will be no limit to the number of partial withdrawals you can take. The only restriction is that withdrawals can only be made every 30 days, so you just need to have at least 30 days between withdrawals.
- Installment Payments: You can take installment payments monthly, quarterly, or annually. You’re able to change the amount and the frequency of payments at any time. In addition, you can stop or start payments at any time, and taking installment payments will not prevent you from taking a partial withdrawal.
- Proportional Withdrawals: If your TSP is made up of both traditional and Roth balances, you will no longer be required to take an equal amount from both balances, instead, you will now have the option to choose from which balance you want your withdrawal to come from.
- Full Withdrawal Requirement/Deadline: After separation, you will no longer be required to make a “full withdrawal election” by age 70 ½. However, you will still be required to take the required minimum distribution from your TSP by April 1st on the year after you reach 70 ½,
Questions & Answers
If you have questions about your TSP options or the benefits currently available to you, please feel free to reach out to us via our contact us form. It may also be a benefit to you to request your federal benefits workbook, available at no cost to all federal employees.
Who Made This Possible
Our thanks goes out to Rep. Elijah E. Cummings (Ranking Member of the House Committee on Oversight and Government Reform) and Rep. Mark Meadows (Chairman of the Subcommittee on Government Operations), for introducing this legislation and working hard to make sure TSP participants have greater flexibility in withdrawing money from their accounts when they need it. None of this would have been possible without your hard work and dedication to our federal workers. We’re grateful to you.
We’d also like to give thanks to those who supported the bill, including the Federal Retirement Thrift Investment Board, The National Active and Retired Federal Employees Association, The American Federation of Government Employees, and the National Treasury Employees Union.
Know Your TSP Options!
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