TSP: Thousands Already Making Use of New Withdrawal System
The board that governs the 401(k)-style retirement savings program authorized a 6.9% budget increase for the agency Monday.
Officials with the federal government’s 401(k)-style retirement savings program said Monday that long anticipated new and simplified withdrawal options are now live, and thousands of participants have already taken advantage of them.
Over the weekend, the Thrift Savings Plan formally implemented the provisions of the 2017 TSP Modernization Act. Participants now are able to make multiple post-separation partial withdrawals, while federal employees ages 59 and a half and older will be able to make up to four in-service withdrawals per year.
Participants can now choose whether withdrawals come from their Roth accounts, traditional accounts, or a combination of both. And those who have begun receiving monthly payments can change the amount and frequency of their payments at any time.
These changes have come with a number of upgrades to the process for making withdrawals, and some can now be done entirely online, without submitting paper forms. On Monday, TSP Project Manager Tanner Nohe said that thousands of people have already done just that.
As of 8 a.m. Monday, the TSP had processed nearly 5,000 such “one and done” withdrawals. Another 4,454 withdrawals will be processed once the participant has sent in a signed form corresponding with their online submission, while 13 people have already faxed in that form and will see checks sent out this week.
“I think it’s both pent up demand combined with the ability to use the new systems,” Nohe said.
Nohe said that although the 2017 law did not require it, the TSP also has lifted the contribution suspension for participants who have taken out hardship withdrawals within the last six months.
“It wasn’t part of the scope of the project, but there was around 63,000 people who had taken hardship withdrawals,” Nohe said. “We removed their suspension dates, and now they’re able to make contributions again.”
The board that governs the Thrift Savings Plan on Monday also authorized a 6.9% increase in the TSP’s budget for fiscal 2020, bringing total spending up to $385.6 million. Despite the increase, the cost per participant ratio will remain at $64. TSP Executive Director Ravindra Deo said that with major projects like the Blended Retirement System and implementing the TSP Modernization Act out of the way, the agency can better focus on improving its core functions and major procurements intended to improve efficiency and the plan's cybersecurity posture.
“We plan to advance key procurement activities, while continuing to enhance benefits and services for participants,” Deo said. “And we will implement internal effectiveness and efficiency initiatives.”
Among the planned projects in fiscal 2020 are procuring a recordkeeping services acquisition vendor, implementing an integrated financial and procurement system, and various efforts to improve cybersecurity and close pending audit findings. Deo said the agency also plans to ensure that the TSP’s portfolios, aside from the government securities (G) fund, will be managed by more than one investment firm.