The TSP Modernization Act became law in 2017 and will be expanding the withdrawal options available to federal employees.
The TSP announced recently that the changes would be going into effect September 15, 2019.
The TSP has also provided some additional information about what is changing and how the withdrawal process will work under the new law. The information is provided in a fact sheet about the TSP Modernization Act recently provided by the TSP. The entire fact sheet is available below and on the TSP’s website, but I’ve included some of the highlights from it below.
What’s Changing Under the TSP Modernization Act?
Beginning September 15, 2019, you will have more options for how and when you can access money from your TSP account. These options fall into the following categories:
- After you separate from service, you can take multiple post-separation partial withdrawals.
- If you’re 59 1⁄2 or older and still working in federal civilian or uniformed service, you can take up to four in-service withdrawals each year.
- You’ll be able to choose whether your withdrawal should come from your Roth balance, your traditional balance, or a proportional mix of both.
- You will no longer need to make a full withdrawal election after you turn 701⁄2 and are separated from federal service. (You will still need to receive IRS required minimum distributions (RMDs).)
- If you’re a separated participant, you’ll be able to take monthly, quarterly, or annual payments.
- You’ll be able stop, start, or make changes to your installment payments at any time.
- You’ll have enhanced online tools to help you make withdrawals in the My Account section of tsp.gov.
What Happens Between Now and When the New Rules Take Effect?
The TSP states:
From now through September 6, you’ll continue to have the same withdrawal options available before the law passed. For details, see the TSP booklet that applies to your situation: Withdrawing Your TSP Account After Leaving Federal Service or In-Service Withdrawals.
Starting September 15, you’ll have those same withdrawal options in addition to those described in the rest of this fact sheet. We’ll update guidance in our booklets and on tsp.gov when the new options go into effect.
If you need to withdraw money before these changes take effect, we must receive your properly completed request by 11:59 p.m. on September 6, 2019.
We will not be able to accept withdrawal requests during a brief period between September 7 and September 14. This transition period allows us to finish processing withdrawal requests we receive before the rules change and prepare to accept requests with the new withdrawal options.
Remember, you’re only gaining options. We’re not taking anything away. You may want to wait until September 15 or later to request your withdrawal so that you can take advantage of more flexibility and use new, more efficient online tools to initiate your request.
How Will Withdrawals From Your TSP Account Work?
The TSP states:
At the same time as we roll out the new withdrawal options, we’ll begin using enhanced online tools to make the withdrawal process even more efficient. Instead of just providing you with a completed paper form to send in, our new online tools will allow you to complete at least part of the transaction online. In many cases you’ll still need to provide notarized signatures or other materials in paper form. But when that happens, you’ll be given only the necessary pages to complete and submit. When we receive those pages, we’ll be able to link them to the information you’ve already submitted securely online and complete your transaction. This will greatly reduce the chance of errors that could cause delays, rejections, or— worse—unintended withdrawals that can’t be reversed.
TSP Modernization Fact Sheet – May 30, 2019 by FedSmith Inc. on Scribd
