House Passes TSP Modernization Bill
The U.S. House of Representatives passed by voice vote a measure improving federal employees to manage their investments under the Thrift Savings Plan (TSP), a 401(k)-style retirement program that claims roughly 5 million participants.
The TSP Modernization Act of 2017 (H.R. 3031) was introduced by Representatives Mark Meadows (R-NC) and Elijah Cummings (D-MD). According to the bill’s summary, it modifies withdrawal rules for the TSP, given that “under current law…employees and Members may make only one partial withdrawal upon reaching age 59-1/2 while employed or one withdrawal after retirement. The bill permits an unlimited number of such withdrawals.”
According to the legislative summary, “the bill also eliminates: (1) the automatic annuity as a default option if the plan participant does not make an election to establish an annuity, and (2) the limitation on age-based in-service withdrawals.”
Rep. Cummings, who also serves as Ranking Member on the House Oversight and Government Reform Committee, spoke in support of the bill on the House floor, calling the legislation “a common-sense, good government bill,” and arguing that, “with greater flexibility, studies show that participants are more likely to keep their assets in their TSP accounts.” The TSP currently manages more than $500 billion in assets.
Richard Thissen, President of the National Active and Retired Federal Employees Association, echoed Cummings’ sentiment, saying, “The current restrictive TSP withdrawal options are one of the leading reasons why participants transfer their money out of the TSP, despite the fact that the TSP provides sound investment options at a low cost. The withdrawal options provided in this bill will create opportunities for participants before and during retirement, provide greater financial independence and encourage participants to keep their money in the TSP.”
According to Government Executive, A similar bill in the Senate (S. 873), introduced by Sens. Rob Portman, R-Ohio, and Tom Carper, D-Del., was approved by that chamber’s Homeland Security and Governmental Affairs Committee in July.
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