Bipartisan Bill to Modernize Federal Thrift Savings Plans
Cummings and Meadows Introduce
Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Rep. Mark Meadows, Chairman of the Subcommittee on Government Operations, introduced legislation to add more flexibility for federal employees and retirees to withdraw funds from their accounts under the Thrift Savings Plan (TSP).
“Our bipartisan bill would better align the TSP with other retirement plans offered by the private sector and state and local governments, and it would encourage participants to keep their TSP accounts to take advantage of low administrative fees even after they retire or separate from federal service,” Cummings said. “I thank the Federal Retirement Thrift Investment Board for working with us on this common-sense bill to give TSP participants what they want: greater flexibility to withdraw money from their accounts to address unexpected life events.”
“I’m grateful for my friend Rep. Cummings’ work on this common-sense reform, and I’m proud to join him in the effort,” Meadows said. “Ultimately, this bill comes down to one simple principle: providing greater flexibility for federal employees. It will give TSP recipients more access to their own funds and, over the long term, allow them the opportunity to continue taking advantage of benefits similar to those available throughout the private sector after federal service.”
Current law limits participants to one withdrawal from their TSP accounts while in federal service upon reaching the age of 59 1/2 (age-based withdrawal). Participants who leave federal service can make only one withdrawal of a portion of the balance in their account (post-separation withdrawal).
Cummings’ and Meadows’ bill, H.R. 3031, the TSP Modernization Act of 2017, would eliminate these restrictions and allow participants to make multiple age-based and post-separation withdrawals, revise the timing and amounts of periodic payments, and elect to combine partial withdrawals or an annuity with periodic payments. The bill also would eliminate automatic annuities as a default option in the absence of an election by participants.
A survey issued in 2014 by the Federal Retirement Thrift Investment Board of TSP participants who withdrew funds showed that more than 50% reported that they would like to access additional funds from their TSPs to address life events.
A study issued by Vanguard in 2013 entitled Retirement Distribution Decisions Among DC Participants found that “50% more participants and assets remain” in retirement plans when partial distributions are allowed.
This bill is supported by the Federal Retirement Thrift Investment Board, the agency that administers the TSP, as well as The National Active and Retired Federal Employees Association, The American Federation of Government Employees, and National Treasury Employees Union.