Bipartisan legislation to loosen withdrawal rules for the Federal Thrift Savings Plan was introduced Thursday by Sens. Rob Portman, R-Ohio, and Tom Carper, D-R.I.
The proposed changes would address what the bill sponsors characterized as overly restrictive withdrawal rules that, according to TSP surveys, are a significant reason for the $9 billion transferred out of the plan every year into higher-fee accounts when employees leave the federal government.
Greg Long, executive director of the Federal Retirement Thrift Investment Board, said in a statement that officials there appreciate the action, which “will meaningfully improve TSP participants' ability to responsibly access their retirement savings.” The TSP had $482 billion in assets as of August 2016.
If enacted, the proposed TSP Modernization Act would allow multiple, partial post-separation withdrawals by retirees, and for active federal employees older than 59½, multiple age-based withdrawals. The bill also seeks to encourage retention in the TSP by allowing quarterly or annual payments, and permitting periodic withdrawals to be changed at any point during the year.
Currently, TSP participants are only allowed two post-separation withdrawals in the form of a lump-sum payment, monthly payments or annuity payments.