Expanding the withdrawal options in the TSP would have an impact on the timing of taxes investors pay on their withdrawal but in the government budget context the impact would be “negligible,” the CBO has reported.
By concluding that such changes would not significantly affect the government’s finances, CBO’s evaluation of S-873 helps clear the way for final passage by Congress. That measure is pending a vote in the full Senate and a companion bill (HR-3031) is ready for a House vote, as well.
The bill would allow current employees to make more than one “age-based” withdrawal after turning age 59 ½. It also would allow those retired or otherwise separated to make multiple partial withdrawals and allow more choice in taking “substantially equal” regular withdrawals, including stopping them and taking out the balance of the account as a lump-sum or using it to purchase an annuity.
Enacting the bill “would affect revenues because TSP participants would be able to withdraw funds differently than under current law and those withdrawals could affect the timing of taxes paid on the withdrawn amounts; those effects, however, would be negligible . . . Enacting the bill would not affect direct spending,” the CBO said.