Rob Portman
Strict withdrawal rules for Thrift Savings Plan (TSP) retirement accounts would be changed to stop encouraging federal workers from transferring savings to other retirement accounts under bipartisan legislation recently introduced by U.S. Sen. Rob Portman (R-OH).
Federal employees are transferring approximately $9 billion from TSP retirement accounts every year, which are defined-contribution plans that give federal employees access to the same retirement benefits that private-sector employees receive through 401(k) plans.
TSP’s strict withdrawal rules are the top reason federal employees are switching from TSP accounts to outside retirement accounts with higher fees, according to user surveys.
The TSP Modernization Act would change current rules that restrict employees separating from the federal workforce to just two post-separation withdrawals. It would allow for multiple post-separation withdrawals to give federal employees flexibility to meet individual needs over time.
“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,” Portman said.
The measure would also allow for multiple age-based withdrawals for current federal employees older than 59.5, and it would encourage TSP plan participation by offering quarterly or annual payments and by permitting periodic withdrawals that could be changed anytime during the year.
U.S. Sen. Tom Carper (D-RI), who introduced the TSP Modernization Act with Portman, said everyone deserves to have financial stability at the end of their career. “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,” Carper said.
Greg Long, the executive director of the Federal Retirement Thrift Investment Board, said enactment of the legislation would “meaningfully improve” TSP participants’ ability to access their retirement savings.