The House tax-writing committee has advanced a bill that among other things would provide relief from the “minimum distribution” requirement applying to retirement savings programs such as the TSP.
That requirement begins in the year after the account holder turns 70 ½ and mandates annual withdrawals of amounts based on life expectancy; failure to take out at least the minimum results in a tax penalty. That provision has been criticized as forcing retirees to withdraw money—and give up its tax-favored status—even if they don’t need it for living expenses.
Under HR-1994, passed by the Ways and Means Committee and now ready for a full House vote, the triggering age would be raised to 72, for individuals who attain age 70 ½ in calendar year 2020 and after. “The age 70 ½ was first applied in the retirement plan context in the early 1960s and has never been adjusted to take into account increases in life expectancy,” according to a committee fact sheet.
The bill also would make numerous other changes to retirement savings programs, including allowing withdrawals without tax penalty for expenses related to childbirth or adoption.
A similar bill (S-972) has been introduced in the Senate.