While the changes to TSP withdrawal options to take effect September 15 primarily involve withdrawal options after retirement or other forms of separation from federal employment, proposed rules from the TSP explain upcoming changes to in-service withdrawals, as well.

Regarding one form of in-service withdrawal, a lump-sum allowed without tax penalty for those still actively employed past age 59 ½, the policy has been that only one such withdrawal has been allowed lifetime. The rules clarify that the new policy of allowing four such withdrawals per year, previously announced, will come with the further restriction that they be at least 30 days apart. “For participants with more than one TSP account, these limits apply separately to each account,” the notice says.


Also as previously announced, those who take lump-sum in-service withdrawals based on financial hardship will no longer have to wait six months before investing again. “Any six-month suspension period in effect will automatically expire on September 15, 2019 and affected participants may restart contributions by submitting a new TSP contribution election. In addition, a participant who takes a hardship withdrawals on or after September 15, 2019 will not have his or her TSP contributions suspended,” the notice says.

Under current rules on both types of in-service withdrawals, for those with both traditional and Roth balances, the withdrawal is taken proportionately from both. “Under the proposed rules, a participant would still be permitted to use this method, but would also have the option to take his or her withdrawal only from the Roth balance or only from the traditional balance,” the notice says.

The rules were published in the June 10 Federal Register and are open for a 60-day comment period.