Fedweek

In what it called a “significant rule change,” TSP has said that effective in January it will loosen restrictions on taking installment payments based on life expectancy as a withdrawal after separating from federal service.

The TSP’s traditional policy, which will continue through the end of this year, is that someone who elects and then stops installment payments—which can be based on either a set dollar amount or on life expectancy – cannot then choose the latter form.

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Some investors use life expectancy-based installment payments to satisfy the standard “required minimum distributions” (RMDs)—amounts that must be withdrawn from the TSP for those who are retired and age 72 or older. (That requirement has been suspended for this year.)

Said the TSP: “Beginning in January 2021, all TSP participants who are eligible for installment payments may elect to receive payments based on life expectancy whether or not they previously started and then stopped installment payments. This means that if you are currently receiving life-expectancy payments, you may now stop them, knowing that you will be able to restart them next year. (You will not be able to restart them in 2020, but you can always use other withdrawal types for which you’re eligible.)”

It said that those wishing to stop such installment payments may do so now through the My Account portal on its site and could restart them effective in January if they wish. “Please disregard any TSP materials that state the old rule, including instructions you may see when using the online tool to stop payments. We will update them as soon as possible,” it said.

The revision builds on a substantial loosening of withdrawal policies that took effect last September, including several changes to the installment payment options.

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FERS Retirement Bundle: 2020 FERS Guide & TSP Handbook