Fedweek

fedweek.com: tsp rmd congress proposal

Proposals are pending in Congress to suspend the requirement that retirees take certain minimum distributions from retirement savings programs such as the TSP once they pass an age threshold, given the recent steep losses in stock markets in response to the Coronavirus pandemic.

The “required minimum distribution” rule compels whose who are retired and have reached age 72 (it was 70 ½ for those reaching that age before the end of 2019) to take out percentages of their accounts—and pay associated taxes—proportionate to their age. With financial markets down, required distributions could force those investors to take a loss on some of their investments, undercutting their financial security, sponsors argue.

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The requirement was suspended for 2009 in the wake of the similar stock market declines in that year due to a financial crisis, they add.

Language to suspend the requirement for this year, retroactive to its beginning, has been added to a Coronavirus relief bill (HR-748) pending before the Senate and to a separate measure (HR-6379) newly offered by House Democrats.

The Senate measure further would allow those still working to take financial hardship-type withdrawals from the TSP and similar programs of up to $100,000 for reasons related to the Coronavirus, without the standard 10 percent tax penalty on in-service withdrawals taken before age 59 1/2. Ordinary taxes still would be due but could be spread over three years and those taking withdrawals could repay them over three years over and above the standard investment limits.

That measure also would raise from $50,000 to $100,000 the amount that could be taken as a general purpose loan from plans such as the TSP.

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