Pension Act Helps TSP Participants

The 2006 Pension Protection Act authorizes Thrift Savings Plan participants to transfer their savings directly into a Roth IRA beginning Jan. 2008. They will have to pay federal income tax on the amounts transferred, but the funds and earnings will be tax free when withdrawn from the Roth IRA. Under current law, they must first move TSP funds into a traditional IRA. Also beginning Jan. 1, beneficiaries of TSP participants who are not their spouses may transfer TSP funds into an existing IRA if the participant dies without declaring the contributions as taxable income. Effective immediately, reservists on active duty for at least 179 days between Sept. 11, 2001, and Dec. 31, 2007, may withdraw funds from their TSP accounts without the normal 10 percent early withdrawal penalty. Those who do so have two years from the end of their active duty to place the amount withdrawn into an IRA.