Members of the House Oversight and Government Reform Committee introduced a bill Friday to provide federal employees with greater flexibility in withdrawing money from their 401(k)-style retirement accounts as a companion to similar legislation working its way through the Senate.
The TSP Modernization Act, sponsored by Reps. Elijah Cummings, D-Md., and Mark Meadows, R-N.C., would allow federal employees and retirees enrolled in the Thrift Savings Plan to make multiple age-based withdrawals after leaving government, as well as let them change the timing and amount of regular payments.
Sens. Rob Portman, R-Ohio, and Tom Carper, D-Del., introduced the legislation (S.873) on the Senate side in April, after it was requested by the Federal Retirement Thrift Investment Board, which governs the TSP. It awaits a hearing before the Senate Homeland Security and Governmental Affairs Committee.
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Under current rules, which have not been updated since the TSP was established in 1986, federal employees who want to make age-based withdrawals can only do so once while they are employed, and then they cannot make a partial withdrawal after leaving government. Retirees who have not made any age-based withdrawals can make one partial post-separation withdrawal, but then must move to full withdrawal options.
When the Senate version of the bill was introduced, FRTIB executive director Greg Long said the legislation would improve feds’ ability to manage their money and save for retirement.
“Enactment of this legislation will meaningfully improve TSP participants’ ability to responsibly access their retirement savings,” he said.
Federal employee unions applauded the introduction of a companion bill in the House.
“Federal employees should have options that allow for flexibility for financial emergencies and life events,” said Thomas Kahn, legislative affairs director for the American Federation of Government Employees, in a letter to lawmakers. “The TSP Modernization Act of 2017 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.”
Tony Reardon, president of the National Treasury Employees Union, said a loosening of the restrictions on withdrawals from the TSP has been a long time coming.
“It is heartening to see the bipartisan support for making the TSP program more user-friendly for federal employees and retirees,” he said. “The TSP is a valuable piece of the federal retirement program and its rules have not kept up with the needs of the modern workforce.”