The TSP has finalized a series of changes to its policies and procedures largely as it had originally planned, with the notable exception of dropping a plan requiring those who retire or separate from the government to d other reasons to wait longer before being able to withdraw from their accounts.
Publication of the final rules in the Federal Register on Tuesday (May 24) precedes the opening of the TSP’s investment window – now set for June 1 – with little to no change in most areas from the rules originally offered in March.
These changes include: making permanent what was a temporary suspension of the requirement that a spouse’s consent to withdrawal decisions must be notarized and signed; the addition of a new $600 fee for processing court orders requiring distributions from child support accounts; increase loan processing fees from $50 to $100; increase the minimum duration of a mortgage from 12 to 61 months; no longer authorize such loans for the purchase of a boat or a vehicle for use as a principal residence; reducing from 60 to 30 days the waiting period for a participant to take out a loan after repaying one; and eliminate the 12-month wait now required to take out a loan if a previous loan has not been fully repaid on time.
One notable exception is that the final rules remove a provision that would have extended 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 intent had been to “limit the number of post-employment distribution requests by participants who are between federal jobs and not truly separate from the public service.”
However, he said that in light of the comments against the change, “we recognize that it has the incidental effect of making participants who have truly separated from government service wait for a considerable time to receive the TSP distributions to which they have the right”.
In keeping the 31-day requirement unchanged, the TSP said it agreed that “the burden this 60-day waiting period would place on TSP participants who have actually left government service outweighs the benefit. to limit the number of erroneous post-employments”. The TSP added that it “will work with employment agencies to ensure they understand that a participant has not left government service until they have been separated for at least 31 days. civilians”.
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 to repay loans sooner than expected.
They further outline several terminology changes, including no longer calling participants’ investments “contributions” and instead reserving that term for monetary agencies put into accounts in the name of FERS employees; abandon the term “inter-fund transfer” which traditionally referred to the transfer of an investor’s money between investment funds, to now call this type of movement a “transfer of funds”; ‘rollover’ rather than ‘transfer’ will be used in reference to the 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 left the public service; and “TSP Withdrawal” will be used to refer to both a post-employment distribution and an in-service withdrawal.
Due to the combination of investment performance and these changes, fund G now owns 37.7% of all assets, including this fund’s share of lifecycle funds L, compared to 33.3% at the end of 2021. Fund C’s share of large company shares has increased from 40.3% to 38% and Fund S’s share of small companies from 13.2% to 11.5%.
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