Pinnacle Personnel Services | Debbie Hatch
If you’ve attended any of my classes, you’ve heard me talk about In-Service Withdrawals from the Thrift Savings Program. These options allow you to remove some of your TSP while you’re still working. We have an Age-Based at 59 ½ years old or older, and a Hardship Withdrawal which can be done at any age but does come with a 10% penalty for early distribution if done prior to age 59 ½. In addition to regular income taxes and the early withdrawal penalty, employees utilizing a Hardship disbursement have typically been prohibited from participating in TSP for the next six months. This has a significant impact on employees under The Federal Employees Retirement System (FERS) because if the employee doesn’t contribute, they aren’t eligible for government matching contributions either.
That brings us to the bulletin. On 15 September 2019, TSP will eliminate the six-month suspension of participant contributions. Any participant who received a financial hardship in-service withdrawal and is suspended from contributing to the TSP will be able to re-start TSP contributions effective September 15, even though the participant may not have completed the six-month suspension period.
Participants whose TSP contributions were suspended as a result of a financial hardship in-service withdrawal will receive a TSP notice alerting them that they can resume contributions as of September 15. Restarting TSP contributions is the participant’s responsibility.
This is the same day that other withdrawal changes related to the TSP Modernization Act will take effect. Those changes include:
Up to four age based withdrawals per year for employees who have attained the age of 59 ½. Taking an age based withdrawal will no longer preclude the participant from taking a partial withdrawal when separated.
Whether or not a separated participant has taken an age based withdrawal (or withdrawals) while working, there is no limit to the number of partial withdrawals they can take, as long as they are not taken more often that every thirty days.
Installment payments can be taken monthly, quarterly or annually. The amount and frequency of installment payments can be changed at any time. Payments can be stopped and started at any time. Taking installment payments will not preclude one from taking partial withdrawals.
Individuals will have the option of choosing from which balance (traditional or Roth) they want their withdrawals to come.
Don’t hesitate to let me know if you have any questions about these impending changes. I’m here to help.