Today, full Committee Ranking Member Elijah Cummings (D-MD) and Subcommittee Chair Mark Meadows (R-NC) of the House Committee on Oversight and Government Reform introduced the TSP Modernization Act, H.R. 3031. The bill would loosen restrictions on how federal employees and retirees can withdraw money from the Thrift Savings Plan (TSP), and is a companion bill to Senate bill, S. 873, introduced by Senators Rob Portman (R-OH) and Tom Carper (D-DE).
As I mentioned when the Senate bill was introduced earlier, I have heard from many NTEU members over the years about the stringent withdrawal rules of the TSP. In our role on the TSP’s Employee Thrift Advisory Council, we have raised the issue many times. This year, with bipartisan support in the Senate and now in the House, legislation has been introduced that would allow active federal employees to make multiple, age-based withdrawals from their TSP accounts and to remain eligible for partial withdrawals once they leave government as well. Those who have left government could make multiple, partial post-separation withdrawals. The legislation also would allow those receiving monthly payments to change the amount of their payment at any time—instead of only once per year—and they could change the frequency of payments as well.
In 2013, TSP participants who no longer worked for the federal government transferred $9 billion out of the TSP to other institutions. According to a TSP-conducted survey of those participants, 27 percent cited a desire for greater flexibility with payments and withdrawals.
As many of you are aware, the withdrawal rules had not been changed since the TSP was established in 1986 and are now outdated. Under current statute, federal employees who wish to make age-based withdrawals can only do so once while they are employed, and then they cannot make a partial withdrawal once they leave government. Those who have left government and haven’t made any age-based withdrawals can make one partial post-separation withdrawal, but then must move to full withdrawal options. These bills would provide NTEU members with desired options, and are likely to incentivize keeping funds in the TSP, allowing our members to continue to benefit from the TSP’s low fees.
NTEU will seek swift passage of the legislation. Following potential passage and enactment of this legislation, it would take the Thrift Board some time to retool their systems to change the withdrawal rules. We will keep you informed on developments regarding these withdrawal options.