TSP Modernization Act of 2017
On Nov. 6, the Senate passed the TSP Modernization Act of 2017. The bill had been passed by voice vote in the House of Representatives on Oct. 11. The legislation is now awaiting the President’s signature. The bill is significant for all federal employees and retirees as it relaxes some Thrift Savings Plan (TSP) rules and restrictions.
If signed into law, the bill would add TSP flexibility in two ways. First, it would allow for multiple post-retirement withdrawals so that retirees can better meet their individual financial needs. Second, it would allow for multiple withdrawals by federal employees who continue to work beyond age 59 1/2, whereas previously only one-such withdrawal was permitted.
Nothing in this bill would negatively affect the rule that allows retired controllers (and others subject to mandatory retirement) to withdraw from their TSP accounts after age 50 without paying a tax penalty. Finally, the bill also would eliminate the requirement that forced retirees to make a TSP election by age 70 1/2 (also known as the “Required Minimum Distribution” rule).