Federal Retirement Thrift looks to bolster participant communication amid government layoffs

The Federal Retirement Thrift Investment Board, Washington, wants retirement savers to know that they do not have to move their money out of the Thrift Savings Plan when they’re no longer a federal government employee.

About two-thirds of former federal employees retain a balance with the $985 billion Thrift Savings Plan one year after leaving the government workforce, according to a quarterly metrics report presented at the board’s Feb. 25 meeting.

The TSP, the nation's largest retirement plan, is the retirement plan for 7.2 million federal employees and members of the uniformed services.

Board member Dana K. Bilyeu asked how the TSP could boost that percentage and Thomas Brandt, chief risk officer, said the staff is working on bolstering communication with participants.

He pointed to a withdrawal survey presented to the board at its January meeting in which roughly 10,000 former employees who took full withdrawals from their TSP accounts were asked a series of questions. The survey was conducted from January to September of 2024.

One of the main takeaways, Brandt said Feb. 25, was that about 6% of survey participants took cash withdrawals because they believed they had to withdraw their accounts when leaving government employment.

“That certainly caught our attention and has been one of the factors why we've been looking at additional opportunities to reinforce that messaging directly with participants when they separate from service, but also through TSP.gov and other messaging that goes out to our participants,” Brandt said.

The survey found that 50% of participants who took a withdrawal rolled over into a traditional individual retirement account, while 15% rolled over into a Roth IRA and 5% transferred to another employer-sponsored retirement plan. Additionally, 43% of participants received a full or partial cash payment.

Since the start of the second Trump administration, Elon Musk’s Department of Government Efficiency has removed about 30,000 employees from the federal workforce, according to New York Magazine.

Employee layoffs and DOGE were not mentioned at the board's Feb. 25 meeting.

Participants who are no longer working in the federal government cannot take hardship withdrawals or loans from the TSP accounts, according to a fact sheet the TSP issued this month.

“Losing a job is stressful enough without having to make big decisions about retirement savings,” said Holly Tardif, director of retirement at Willis Towers Watson.

The key for TSP participants who have lost their jobs it to “take a step back and take a look at all of their options before making any quick moves that could be impactful down the road,” Tardif added.

“Absent a significant financial need, that could be leaving your 401(k) savings right where it is and then contemplating, with your new employer, rolling that into a new employer’s qualified retirement plan to avoid the unnecessary tax consequences and to keep those savings invested.”