New TSP withdrawal options are live. Here’s what you need to know

Within the first 24 hours of its launch over the weekend, participants in the savings plan are already flocking to explore a variety of new withdrawal options that went live on Sunday.

As of Monday morning, about 9,300 to 9,400 participants have already submitted or completed a new withdrawal request, according to the Federal Retirement Thrift Investment Board, the agency that administers the TSP.

Participants have completed approximately 5,000 withdrawal requests to date, Tanner Nohe, FRTIB’s withdrawals…


Within the first 24 hours of its launch over the weekend, participants in the savings plan are already flocking to explore a variety of new payout optionswhich went live on Sunday.

As of Monday morning, about 9,300 to 9,400 participants have already submitted or completed a new withdrawal request, according to the Federal Retirement Thrift Investment Board, the agency that administers the TSP.

Participants have completed about 5,000 disbursement requests so far, Tanner Nohe, FRTIB’s disbursements project manager, said Monday at the agency’s monthly board meeting. These requests will be processed later Monday evening and the TSP will begin distribution later this week.

Participants have submitted more than 1,400 applications while more than 4,450 are awaiting final participant signatures.

“Everything seems to be working fine,” Nohe said.

TSP contact centers were particularly busy Monday answering participants’ questions, said Tee Ramos, director of TSP participant services.

According to FRTIB, it is currently unclear whether TSP participants are catching up on the new withdrawal options, or whether account holders are simply aware of the new changes and are curious to explore them.

The authority has been busy for months preparing its IT and other systems for the new withdrawal options.

The TSP Modernization Act, the authorized The FRTIB to make these changes based on feedback from plan participants gave the agency until November 2019 to implement the new options.

“The old rules were so restrictive and complicated, really too complicated,” says Mark Keen, a certified financial planner and federal benefits expert with the National Active and Retired Federal Employees (NARFE) Association. said last week on It’s your turn with Mike Causey. “Unfortunately, under certain circumstances, they led to negative consequences.”

Here’s what’s new:

  • The option of monthly, quarterly and annual installments;
  • Ability to make unlimited partial withdrawals after separation;
  • Partial withdrawals and installment payments possible at the same time;
  • Option to choose withdrawal payment source including traditional, Roth or both;
  • Up to four age-related departures from service at age 59.5 or older; and,
  • An end to the suspension of contributions if a participant claims hardship benefits.

“They will really encourage federal employees who are still working — if they are over 59.5 years old, and also those who have left federal service, whether they have quit or retired — to manage their TSP into retirement, by leaving it there instead of having to move it to one [individual retirement account] IRA or somewhere else to have the flexibility they wanted,” Tammy Flanagan, a federal pension benefits specialist, said in an interview at the federal drive with Tom Temin.

But the old rules may have been so complicated that TSP participants may not fully understand what exactly is different.

“We see that most employees have a conceptual understanding that this change is positive and improves their options when it comes to allocating their money, but there is limited understanding of how the changes will directly impact them,” said Greg Klingler , Director of Wealth Management for the Wealth Management Division of the Government Employees Benefits Association.

To better explain how these new payout options will affect you and your TSP, Federal News Network asked some federal benefits experts to walk readers through the most common questions they’ve received from their customers in the run-up to these changes.

Here’s what they said:

What are my new options in general?

There are many changes, but here are some highlights.

Under the new TSP withdrawal options, all participants can withdraw once every 30 days. Subscribers who have left federal service have no further restrictions to make partial withdrawals from the TSP beyond the 30-day requirement.

Participants who are still in federal service at the age of 59.5 years or older can claim up to four partial withdrawals from the TSP during a calendar year. However, the 30-day limit still applies, so participants cannot, for example, make four partial withdrawals within two months.

Subscribers can now make monthly, quarterly, or annual withdrawals, and they can change the amount of those payments at any time — or stop and restart them.

Additionally, at age 70.5, participants no longer have to make a final decision about their TSP balance. Now, the TSP pays the remaining balance of a participant’s account through required minimum distributions (RMDs) to those who have reached the age of 70.5 and have not yet determined how they wish to withdraw the remaining funds in their accounts.

“That was the main reason employees left TSP,” said Klingler. “The idea of ​​requiring an employee to make a semi-permanent decision [about] her portfolio [was] for no other reason than her age.”

Going forward, these participants will be notified by the TSP that they have not made a full exit election. These participants would receive multiple reminders throughout the year to make the required minimum distributions that the Internal Revenue Code sets each year.

What if I have an outstanding loan balance but want to withdraw from my TSP after I retire or leave the government?

TSP participants in this scenario have two choices under the new payout rules, Flanagan said.

Participants with an outstanding TSP loan may choose to keep the outstanding amount, declare it as a taxable distribution, or repay the loan.

“You may be able to transfer the taxable amount of the distribution to an IRA or qualifying employer plan within 60 days to avoid taxes and penalties,” Flanagan added.

Participants must choose whether to declare the unpaid balance or pay the loan before making a withdrawal.

Am I still exempt from paying contributions in the event of a hardship claim as long as I have the loan?

no Under the old rule, TSP participants who claimed hardship benefits were temporarily suspended from paying contributions for the next six months.

But under the new options, that six-month contribution suspension is gone.

The FRTIB will notify approximately 63,000 TSP participants who have taken hardship withdrawals within the past six months to let them know they can continue to contribute, Nohe said.

Why should I make a partial withdrawal when I’m already withdrawing money from my TSP on a monthly or quarterly basis?

Keen said the flexibility to schedule semi-annual payments and make partial withdrawals when needed makes it easier for participants to access their own money, especially if you need some extra cash to pay for major home repairs or another sudden life event.

“When someone retires, they don’t know exactly what their expenses are going to be,” he said. “They’re in a transition period, and yet we expect them to definitely be able to say, ‘Here’s what I want from my TSP on a monthly basis and stick with it for a full year.”

Do I still have to take equal distributions from my Roth and traditional TSP accounts?

no Among the new withdrawal options, participants can choose which balance (traditional or Roth) to withdraw money from. They can also choose exactly how much they want to take from each TSP account.

“Now you can separate that,” Flanagan said. “You can tell the TSP I just want these payments to come from my traditional thrift, and then later you can choose to have the payments come from the Roth TSP.”

If you do not specify which balance you wish to tap into, the TSP will withdraw equal amounts from your Traditional and Roth accounts.

Participants can’t specify which fund — the C, G, F, S, I, or lifecycle fund — to withdraw from, Flanagan said.

How can I actually make these payout changes? Can I process them electronically?

Yes and no. The FRTIB has replaced many of the old withdrawal forms with new ones, and all of them will look a little different than you might remember.

Participants fill out these forms almost entirely online, and a “smart” tool helps you calculate and fill in some fields automatically. Once the forms are complete, participants are typically asked to print them out and then sign them before sending them to the TSP.

In many cases, participants may require a notarized signature or two before the TSP can accept a form as complete.

“It won’t be a seamless electronic process in every case, but you will fill out this information online without physically holding the form until it’s complete,” Flanagan said.

The FRTIB is evaluating whether it can eliminate the need for a notarized signature and process all withdrawal requests electronically. The agency is currently engaged in the acquisition of recording services that will eventually modernize FRTIB’s plan operations and customer service platform.

With this acquisition, the agency hopes to automate more processes, including withdrawal requests.

Where else can I find out about the new TSP payout options?

The best place to start is with the TSP itself, which has its own information Video about the new changes published on his YouTube channel. Further information can also be found on the TSP website here.

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