U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

1 

79–010 

" ! SENATE 115TH CONGRESS

1st Session 

REPORT

2017

115–183 

Calendar No. 260 

TSP MODERNIZATION ACT OF 2017 

R E P O R T 

OF THE

COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

TO ACCOMPANY

S. 873 

TO AMEND SECTION 8433 OF TITLE 5, UNITED STATES CODE, TO 

PROVIDE FOR FLEXIBILITY IN MAKING WITHDRAWALS FROM THE 

THRIFT SAVINGS FUND 

NOVEMBER 8, 2017.—Ordered to be printed 


congress.#13
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin, Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

JOHN HOEVEN, North Dakota 

STEVE DAINES, Montana 

CLAIRE MCCASKILL, Missouri 

THOMAS R. CARPER, Delaware 

JON TESTER, Montana 

HEIDI HEITKAMP, North Dakota 

GARY C. PETERS, Michigan 

MAGGIE HASSAN, New Hampshire 

KAMALA D. HARRIS, California 

CHRISTOPHER R. HIXON, Staff Director 

GABRIELLE D’ADAMO SINGER, Chief Counsel 

SATYA P. THALLAM, Chief Economist 

MARGARET E. DAUM, Minority Staff Director 

STACIA M. CARDILLE, Minority Chief Counsel 

CHARLES A. MOSKOWITZ, Minority Senior Legislative Counsel 

KATHERINE C. SYBENGA, Minority Counsel 

LAURA W. KILBRIDE, Chief Clerk 

1Fed. Ret. Thrift Inv. Bd., Withdrawing Your TSP Account After Leaving Federal Service, 

TSPBK02, March 2014, at 4. 

Calendar No. 260 

115TH CONGRESS SENATE REPORT " ! 1st Session 115–183 

TSP MODERNIZATION ACT OF 2017 

NOVEMBER 8, 2017.—Ordered to be printed 

Mr. JOHNSON, from the Committee on Homeland Security and 

Governmental Affairs, submitted the following 

R E P O R T 

[To accompany S. 873] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Homeland Security and Governmental Affairs, 

to which was referred the bill (S. 873) to amend section 8433 of 

title 5, United States Code, to provide for flexibility in making 

withdrawals from the Thrift Savings Fund, having considered the 

same, reports favorably thereon with an amendment and recommends that the bill, as amended, do pass. 

CONTENTS 

Page 

I. Purpose and Summary .................................................................................. 1 

II. Background and Need for the Legislation ................................................... 2 

III. Legislative History ......................................................................................... 3 

IV. Section-by-Section Analysis .......................................................................... 3 

V. Evaluation of Regulatory Impact .................................................................. 4 

VI. Congressional Budget Office Cost Estimate ................................................ 5 

VII. Changes in Existing Law Made by the Bill, as Reported ........................... 5 

I. PURPOSE AND SUMMARY

The TSP Modernization Act of 2017 seeks to provide greater 

flexibility for Federal employees and retirees to withdraw funds 

from their Thrift Savings Plan (TSP) accounts. Currently, upon 

separation from Federal employment, Federal employees are allowed only one partial post-separation withdrawal, after which only 

full withdrawal options are available.1 And similarly, for active 

Federal employees over age 591⁄2, only one partial age-based withVerDate Sep 11 2014 07:48 Nov 09, 2017 Jkt 079010 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\SR183.XXX SR183
2 

2Pub. L. No. 99–335 (codified as amended in scattered sections 5 U.S.C.). 

3Wilmer L. Kerns, Federal Employees’ Retirement System Act of 1986, 49 SOCIAL SEC. BULLETIN, no. 11, November 1986, at 5. 4Pub. L. No. 99–335 (codified as amended at 5 U.S.C. § 8433). 

5 Id. 

6Pub. L. No. 103–226. 

7 Id. at § 9. 8 Id. 

9 Briefing for Majority Committee Staff Before the Perm. Subcomm. on Investigations of the S. 

Comm. on Homeland Sec. & Governmental Affairs, 115th Cong. (2017) (statement of Kim Weaver, Director of External Affairs, Federal Retirement Thrift Investment Board). 10Fed. Ret. Thrift Inv. Bd., Fund Info. (July, 2017). 11Fed. Ret. Thrift Inv. Bd., Ann. Rep. of the Thrift Sav. Plan Required by § 105 of the TSP 

Enhancement Act of 2009 (2017), at 2. 

drawal is allowed. Full withdrawal options include a regular 

stream of monthly payments, an annuity purchased through the 

TSP, or a full lump sum. The TSP Modernization Act would allow 

Federal employees to withdraw their money on an as-needed basis 

with more flexible rules. 

II. BACKGROUND AND THE NEED FOR LEGISLATION

The Federal Employees’ Retirement System Act of 1986 (FERSA) 

established the Federal Employees Retirement System (FERS), 

which includes a defined-contribution plan available to Federal employees, known as the TSP.2 The FERSA began the transition away 

from the Civil Service Retirement System, with employees hired 

after December 31, 1983 eligible for the new system.3

The FERSA created different options for TSP withdrawals depending on a participant’s Federal service. Participants eligible for 

retirement and annuity payment under FERS could: (1) withdraw 

the account in one or more payments; (2) receive an annuity; (3) 

defer an annuity; or (4) transfer the funds to an IRA or any qualified plan.4 Those participants not entitled to an annuity (e.g., those 

with less than five years of Federal service) would have two options: (1) withdraw the funds at age 62; or (2) rollover to an IRA 

or any qualified pension plan.5

As the TSP was implemented, the Federal Retirement Thrift Investment Board (FRTIB) found that these options were confusing 

to participants and difficult to clearly explain. Congress sought to 

address these issues through the Federal Workforce Restructuring 

Act of 1994.6 The law increased withdrawal flexibility so that all 

participants, irrespective of eligibility for retirement benefits, 

would be entitled to all withdrawal options.7 Additionally, it expanded spousal waiver provisions, which previously applied only to 

FERS participants who separated with retirement eligibility, to all 

FERS participants.8 According to the FRTIB, the law ‘‘greatly enhanced communication efforts by reducing the number of complicated forms and communications materials, reduced administrative costs, and improved withdrawal time frames.’’ 9

April 2017 marked the 30th anniversary of the first contributions 

made to the TSP. Today more than five million Americans have 

savings in TSP accounts, worth a combined $512 billion in assets.10

Yet FRTIB surveys consistently show that participants dislike the 

plan’s lack of withdrawal flexibility.11 These surveys show ‘‘significant participant dissatisfaction with the availability of only one 

partial withdrawal’’ and ‘‘[m]any participants view the TSP as 

3 

12Memorandum from Greg Long, Exec. Dir., Fed. Ret. Thrift Inv. Bd., to Fed. Ret. Thrift Inv. 

Bd. Members (July 7, 2015). 13 Id. 14 Id. 15 Vanguard, How America Saves 2016 97 (2016). 16 Id. 

overly restrictive.’’ 12 The plan’s overly restrictive partial withdrawal rules have caused workers to cash out from their TSP entirely, often into higher fee private retirement accounts.13

In addition, the FRTIB surveyed options offered by other defined 

contribution plans, both in the private sector and state/local governments.14 While there is no single private sector standard, it is 

clear that the bulk of the other plans provide significantly greater 

withdrawal flexibility than is currently offered by the TSP.15 Other 

plans also tend to offer greater ability to make multiple partial 

withdrawals as well as make more frequent changes to their 

monthly payment amounts.16

The TSP Modernization Act of 2017 would provide more options 

to Federal employees and members of the uniformed services who 

would like greater flexibility in accessing their TSP retirement savings. The bill would amend section 8433, Title 5, to allow for multiple partial post-separation withdrawals, and multiple age-based 

withdrawals. Allowing multiple partial post-separation and agebased withdrawals would enable Federal employees to withdraw 

their money on an as-needed basis. In addition to enabling multiple 

post-separation and age-based withdrawals, S. 873 would make the 

following changes to the withdrawal rules: 

• for participants who choose to withdraw their money via 

periodic payments, they may revise the timing and amounts of 

periodic payments; 

• separated federal employees will have the option of combining partial withdrawals or taking an annuity with periodic 

payments; and 

• the bill eliminates automatic annuities as the default option if participants do not elect an alternative. 

III. LEGISLATIVE HISTORY

Senator Rob Portman (R–OH) introduced S. 873 on April 6, 2017, 

with Senator Thomas R. Carper (D–DE). The bill was referred to 

the Committee on Homeland Security and Governmental Affairs. 

The Committee considered S. 873 at a July 26, 2017 business meeting. 

The Committee ordered S. 873 reported favorably on July 26, 

2017, by voice vote en bloc. Senators present were Johnson, 

Portman, Lankford, Daines, McCaskill, Tester, Heitkamp, Peters, 

Hassan and Harris. Consistent with Committee Rule 11, the Committee reports the bill with a technical amendment by mutual 

agreement of the Chairman and Ranking Member. 

IV. SECTION-BY-SECTION ANALYSIS OF THE BILL, AS REPORTED

Section 1. Short title 

This section provides the bill’s short title, the ‘‘TSP Modernization Act of 2017.’’ 

4 

Section 2. Thrift Savings Plan account withdrawal flexibility 

Section (a)(1) would eliminate the restriction that participants 

cannot take partial post-separation withdrawals if they’ve already 

taken a partial in-service withdrawal and would permit multiple 

post-separation withdrawals. 

Section (a)(2) would permit, but does not require, the Executive 

Director of the Federal Retirement Thrift Investment Board to 

limit the number of post-separation withdrawals. This language 

would allow the FRTIB to address the situation of administrative 

costs increasing unexpectedly as a result of this legislative change. 

Section (b) permits the Executive Director to allow participants 

to stop periodic payments by regulation. In conjunction with existing Section 8433(b)(4), it would also permit the Executive Director 

to allow participants to elect an annuity while receiving monthly 

payments. 

Section (c) eliminates the withdrawal election deadline. TSP participants are required to make a post-separation withdrawal election by April 1st of the year following the year in which they turn 

701⁄2 and are separated from Federal service. This withdrawal election deadline is independent of the IRS requirement to begin distributing required minimum distributions (RMDs) annually by 

April 1st of the year following the year in which they are 701⁄2 and 

separated from Federal service. This amendment does not impact 

the RMD rules. 

Section (d) permits multiple age-based withdrawals. 

Section (e) contains a technical amendment eliminating the reference to paragraphs (1) and (2) of section (h) and replacing it with 

the correct reference paragraphs (1) and (2) of section 8433(f) to 

conform to amendments made by Public Law 103–226. 

Section (f) requires the FRTIB Executive Director to issue regulations to implement this Act, as soon as administratively practicable. 

Section (g) contains the effective date of the legislation. The 

amendments shall take effect on the date of enactment and shall 

apply on and after the effective date of the regulations issued 

under section (f). 

V. EVALUATION OF REGULATORY IMPACT

Pursuant to the requirements of paragraph 11(b) of rule XXVI of 

the Standing Rules of the Senate, the Committee has considered 

the regulatory impact of this bill and determined that the bill will 

have no regulatory impact within the meaning of the rules. The 

Committee agrees with the Congressional Budget Office’s statement that the bill contains no intergovernmental or private-sector 

mandates as defined in the Unfunded Mandates Reform Act and 

would impose no costs on state, local, or tribal governments. 

5 

VI. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

AUGUST 17, 2017. 

Hon. RON JOHNSON, 

Chairman, Committee on Homeland Security and Governmental Affairs, U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 873, the TSP Modernization 

Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Dan Ready. 

Sincerely, 

KEITH HALL. 

Enclosure. 

S. 873—TSP Modernization Act of 2017 

S. 873 would expand the withdrawal options for participants in 

the Thrift Savings Plan (TSP), the federal government’s definedcontribution retirement plan. Currently, participants may only 

make one partial withdrawal after they turn 591⁄2 while employed 

or one such withdrawal after they retire. (A partial withdrawal is 

a single withdrawal up to the full balance in the participant’s account that is not repeated regularly.) Enacting S. 873 would allow 

an unlimited number of such withdrawals. 

The staff of the Joint Committee on Taxation estimate that enacting S. 873 would affect revenues because TSP participants 

would be able to withdraw funds differently than under current 

law and those withdrawals could affect the timing of taxes paid on 

the withdrawn amounts; those effects, however, would be negligible. Because the bill would affect revenues, pay-as-you-go procedures apply. Enacting the bill would not affect direct spending. 

CBO estimates that enacting S. 873 would not increase net direct 

spending or significantly affect on-budget deficits in any of the four 

consecutive 10-year periods beginning in 2028. 

S. 873 contains no intergovernmental or private-sector mandates 

as defined in the Unfunded Mandates Reform Act and would impose no costs on state, local, or tribal governments. 

On August 16, 2017, CBO transmitted an estimate for H.R. 3031, 

as ordered reported by the House Committee on Oversight and 

Government Reform on July 19, 2017. The two bills are similar and 

the estimated budgetary effects are the same. 

The CBO staff contact for this estimate is Dan Ready. The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by S. 873 as reported are shown as follows (existing law proposed to be omitted 

is enclosed in brackets, new matter is printed in italic, and existing 

law in which no change is proposed is shown in roman): 

6 

UNITED STATES CODE 

* * * * * * * 

TITLE 5—GOVERNMENT ORGANIZATION AND 

EMPLOYEES 

* * * * * * * 

PART III—EMPLOYEES 

* * * * * * * 

Subpart G—Insurance and Annuities 

* * * * * * * 

CHAPTER 84—FEDERAL EMPLOYEES’ RETIREMENT 

SYSTEM 

* * * * * * * 

Subchapter III—Thrift Savings Plan 

* * * * * * * 

SEC. 8432b. CONTRIBUTIONS OF PERSONS WHO PERFORM MILITARY 

SERVICE. 

(a) * * * 

* * * * * * * 

(h)(1) * * * 

(2)(A) An employee to whom this section applies may elect, for 

purposes of øsection 8433(d), or paragraph (1) or (2) of section 

8433(h)¿ subsection (d) or (f) of section 8433, as the case may be, 

to have such employee’s separation (described in subsection (a)(1)) 

treated as if it had never occurred. 

* * * * * * * 

SEC. 8433. BENEFITS AND ELECTION OF BENEFITS. 

(a) * * * 

(b) * * * 

(c)(1) In addition to the right provided under subsection (b) to 

withdraw the balance of the account, an employee or Member who 

separates from Government service øand who has not made a withdrawal under subsection (h)(1)(A) may make one withdrawal¿ may 

make 1 or more withdrawals of any amount as a single payment 

in accordance with subsection (b)(2) from the employee’s or Member’s account. 

* * * * * * * 

(4) * * * 

(5) Withdrawals under this subsection shall be subject to such 

other conditions as the Executive Director may prescribe by regulation. 

(d)(1) * * * 

7 

(2) A former employee or Member may not øchange an¿ return 

a payment that was made under an election under this section on 

or after the date on which øa payment¿ such payment is made in 

accordance with such election or, in the case of an election to receive an annuity, the date on which an annuity contract is purchased to provide for the annuity elected by the former employee 

or Member. 

(e) * * * 

(f)ø(1) Notwithstanding¿ Notwithstanding subsection (b), if an 

employee or Member separates from Government employment, and 

such employee’s or Member’s nonforfeitable account balance is less 

than an amount that the Executive Director prescribes by regulation, the Executive Director shall pay the nonforfeitable account 

balance to the participant in a single payment, unless an election 

under section 8432b(h)(2) is made to treat such separation for purposes of this paragraph as if it had never occurred. 

ø(2) Unless otherwise elected under this section, and subject to 

paragraph (1), benefits under this subchapter shall be paid as an 

annuity commencing for an employee, Member, former employee, or 

former Member on April 1 of the year following the latest of the 

year in which— 

ø(A) the employee, Member, former employee, or former 

Member becomes 701⁄2 years of age; or 

ø(B) the employee, Member, former employee, or former 

Member separates from Government employment.¿ 

(g) * * * 

(h)(1) An employee or Member may apply, before separation, to 

the Board for permission to withdraw an amount from the employee’s or Member’s account based upon— 

(A) the employee or Member having attained age 591⁄2; or 

(B) financial hardship. 

ø(2) A withdrawal under paragraph (1)(A) shall be available 

to each eligible participant one time only.¿ 

ø(3)¿ (2) A withdrawal under paragraph (1)(B) shall be available 

only for an amount not exceeding the value of that portion of such 

account which is attributable to contributions made by the employee or Member. 

ø(4)¿ (3) Withdrawals under paragraph (1) shall be subject to 

such other conditions as the Executive Director may prescribe by 

regulation. 

ø(5)¿ (4) A withdrawal may not be made under this subsection 

unless the requirements of section 8435(e) of this title are satisfied. 

Æ