Carper, Portman Introduce the TSP Modernization Act
WASHINGTON– U.S. Senators Tom Carper (D-Del.) and Rob Portman (R-Ohio) introduced legislation today to strengthen Thrift Savings Plan (TSP) retirement accounts by modernizing the overly restrictive TSP withdrawal rules that are currently inducing federal workers to transfer their retirement accounts out of the TSP to higher-fee accounts.
“Making smart choices to prepare for retirement can be difficult, but everyone deserves to have financial stability at the end of their career,” said Senator Carper. “The Thrift Savings Plan is a tool our hard-working federal employees count on to plan for their futures, but we need to make it work better for them. I’m pleased to have worked with Senator Portman on a bipartisan effort to do just that.”
“The TSP has been instrumental in helping federal employees maximize their retirement security, and to mark the 30th anniversary of this critical savings vehicle this bill takes important steps to modernize this system to benefit them in the future,” said Senator Portman. “I urge my Senate colleagues to support this bipartisan legislation.”
“We are very appreciative of Senators Portman and Carper’s leadership on this important issue,” said Greg Long, Executive Director of the Federal Retirement Thrift Investment Board. “Enactment of this legislation will meaningfully improve TSP participants’ ability to responsibly access their retirement savings.”
NOTE: Currently, federal workers are transferring about $9 billion out of their TSP retirement funds and into other higher fee retirement accounts every year upon separating from federal employment. And a significant reason—as shown by TSP surveys—is the plan’s overly strict withdrawal rules, which provide less flexibility than do private sector options.
By modernizing these outdated withdrawal regulations, the TSP Modernization Act will provide federal employees with greater retirement flexibility, and advance their ability to retire with dignity. Specifically, for federal employees separate from the federal workforce, the bill will change the current rules that allow only two post-separation withdrawals (in the form of a lump-sum payment, a stream of monthly payments, or annuity payments) to allow multiple, partial post-separation withdrawals that retirees can time to their individual needs. And for federal employees who are still working and are older than 59½, the bill will allow multiple age-based withdrawals. The bill also adds flexibility to encourage retention in the TSP by allowing the election of quarterly or annual payments, and permitting periodic withdrawals to be changed at any point during the year.