Fedweek

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Among the provisions added to one of the bills (HR-1865) to fund agencies through the remainder of the fiscal year are several that could affect withdrawal policies in the TSP.

The provisions are among a wide-ranging set of changes to tax policies involving IRAs and employer-sponsored retirement savings programs. While the TSP is not specifically mentioned in the language, in general it operates under the same tax policies applying to 401(k)-type plans.

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One would affect the “required minimum distribution” rule which in general requires account holders to begin taking withdrawals by April 1 of the year after they turn age 70 ½. That would rise to age 72 but apparently only for those below age 70 ½ as of the end of this year.

Another would allow penalty-free withdrawals by those still working of up to $5,000 of expenses related to a birth or adoption. Currently, the TSP allows in-service withdrawals only for financial hardship or after reaching age 59; a 10 percent early withdrawal penalty applies to the former type but not to the latter.

In both cases guidance from the IRS likely would be needed before the policies actually would take effect in the TSP or in other similar programs.

More on TSP withdrawal policies at ask.FEDweek.com

TSP Investors Handbook, New 7th Edition