Portman’s TSP Modernization Act Signed Into Law
Bill Strengthens Retirement Security for Federal Employees
WASHINGTON, D.C. – U.S. Senator Rob Portman (R-OH) announced that President Trump has signed into law his TSP Modernization Act, and issued the following statement:
First introduced in April by Portman and Senator Tom Carper (D-DE), this legislation provides much-needed retirement flexibility to federal employees by modernizing the Thrift Savings Plan’s (TSP) outdated withdrawal rules. Under TSP’s current rules, participants may only elect one partial age-based withdrawal after they turn 59½ or one partial post-separation withdrawal after separation from federal employment. The TSP Modernization Act would eliminate these outdated restraints and allow for unlimited age-based or post-separation withdrawals.
“I’m pleased that the president has signed this common-sense bill into law,” said Senator Portman. “This bipartisan measure will make the TSP more responsive to the needs of its participants, and give federal employees the retirement flexibility they deserve.”
NOTE: According to recent TSP surveys, 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 is the plan’s overly strict withdrawal rules, which provide less flexibility than 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By modernizing these outdated withdrawal regulations, the TSP Modernization Act will provide federal employees with greater retirement flexibility and advance their ability to retire with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 separated from the federal workforce, the bill will change the current rules that allow only one partial post-separation withdrawal (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 over age 59½ who are still working, 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 by permitting periodic withdrawals to be changed at any point during the year.
The Congressional Budget Office has determined that the bill would have no significant impact on federal revenues. A section-by-section of the TSP Modernization Act can be found here and the text is found here.