The TSP has finalized a range of changes to its policies and procedures largely as it initially planned, with the notable exception of dropping a plan to require those who retire or separate from government for other reasons to wait longer before they could withdraw from their accounts.
Publication of the final rules in Tuesday’s (May 24) Federal Register comes ahead of the opening of the TSP’s investment window—now set for June 1—with little or no change in most areas from the rules as originally proposed in March.
Those changes include: making permanent what had been a temporary suspension of a requirement that a spouse’s consent to withdrawal decisions be notarized as well as signed; adding a new $600 fee for processing court orders requiring distributions from accounts for child support; raising the fee for processing a loan from $50 to $100; raising the minimum term for a residential loan from 12 to 61 months; no longer allowing such loans for the purchase of a boat or vehicle to be used as a primary residence; reducing from 60 to 30 days the period a participant must wait to take out a loan after paying one off; and eliminating the 12-month wait now required to take out a loan if a prior loan was not fully repaid on time.
One notable exception is that final rules drop a provision that would have lengthened from 31 to 60 days the time an account holder must be separated from service before becoming eligible for a withdrawal. The notice said the intention had been to “limit the number of post-employment distribution requests by participants who are between federal jobs and are not truly separated from government service.”
However, it said that in light of comments against the change, “we recognize that it has the ancillary effect of making participants who truly have separated from government service wait a substantial amount of time to receive TSP distributions to which they are entitled.”
In keeping the 31-day requirement unchanged, the TSP said it agreed that “the burden this 60-day waiting period would impose on TSP participants who have actually separated from government service outweighs the benefit of limiting the number of erroneous post-employment.” The TSP added that it “will work with employing agencies to make sure they understand that a participant has not separated from government service until s/he has been separated for at least 31 calendar days.”
The rules also cover several changes under the new records system designed to simplify and speed up rollovers, withdrawals, beneficiary designations and certain other transactions, while adding options for repaying loans ahead of schedule.
They further describe several changes to terminology including no longer calling investments by participants “contributions” and instead reserving that term for money agencies put into accounts on behalf of FERS employees; dropping the term “interfund transfer” which traditionally has referred to an investor’s shift of money between investment funds, instead now calling that type of movement a “fund transfer”; “rollover” rather than “transfer” will be used in reference to movement into the TSP of money from another retirement savings plan; “post-employment distribution” will be used rather than “post-employment withdrawal” for a distribution to a participant who has separated from government service; and “TSP withdrawal” will be used to refer to both a post-employment distribution and an in-service withdrawal.