U.S. House of Representatives Passes Cummings and Meadows Bill to Modernize "Federal Thrift Savings Plans"

United States Congress

For Immediate Release:
October 11, 2017

Contacts
Cummings: Jennifer Werner/Aryele Bradford - 202-226-5181
Meadows: Ben Williamson – (202) 225-6401

House Passes Cummings and Meadows Bill to
Modernize Federal Thrift Savings Plans

Washington, DC (Oct. 11, 2017)—Today, the House of Representatives voted unanimously to pass legislation introduced by Rep. Elijah E. Cummings, the Ranking Member of the House Committee on Oversight and Government Reform, and Rep. Mark Meadows, the Chairman of the Subcommittee on Government Operations, to add more flexibility for federal employees and retirees to withdraw funds from their accounts under the Thrift Savings Plan (TSP).

“Today’s vote shows that there is widespread support for modernizing the federal Thrift Savings Plan,” said Cummings. “Providing more flexibility will allow federal employees and retirees to more easily access their retirement savings to address emergencies or life events and encourage them to retain their assets in the TSP, which has one of the lowest administrative fees in the industry. I thank Chairmen Gowdy and Meadows for their support.”

“I want to thank my colleague Mr. Cummings for his support and work on this effort,” said Meadows. “This is a common-sense reform that will go a long way in facilitating needed updates to the Thrift Savings Plan program, providing more flexibility for retirees and allowing TSP recipients to keep taking advantage of benefits, similar to those available for private sector employees, after their time in federal service has ended.”

This bill is supported by the Federal Retirement Thrift Investment Board, the agency that administers the TSP, as well as The National Active and Retired Federal Employees Association, The American Federation of Government Employees, and National Treasury Employees Union.

Current law limits participants to one withdrawal while in federal service after reaching the age of 59 1/2 (age-based withdrawal). Participants who leave federal service can make only one withdrawal of a portion of the balance in their account (post-separation withdrawal).

Cummings’ and Meadows’ bill, H.R. 3031, the TSP Modernization Act of 2017, would eliminate these restrictions and allow participants to make multiple age-based and post-separation withdrawals, revise the timing and amounts of periodic payments, and elect to combine partial withdrawals or an annuity with periodic payments. The bill also would eliminate automatic annuities as a default option in the absence of an election by participants.

A survey issued in 2014 by the Federal Retirement Thrift Investment Board of participants who withdrew funds showed that more than 50% reported that they would like to access additional funds from their accounts to address life events.

A study issued by Vanguard in 2013 entitled Retirement Distribution Decisions Among DC Participants found that “50% more participants and assets remain” in retirement plans when partial distributions are allowed.