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[House Report 115-343]
[From the U.S. Government Publishing Office]

115th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                     {      115-343

======================================================================

 
                     TSP MODERNIZATION ACT OF 2017

                                _______
                                

October 10, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Gowdy, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3031]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Oversight and Government Reform, to whom 
was referred the bill (H.R. 3031) to amend title 5, United 
States Code, to provide for flexibility in making withdrawals 
from a Thrift Savings Plan account, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     2
Section-by-Section...............................................     5
Explanation of Amendments........................................     5
Committee Consideration..........................................     5
Roll Call Votes..................................................     6
Application of Law to the Legislative Branch.....................     6
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     6
Statement of General Performance Goals and Objectives............     6
Duplication of Federal Programs..................................     6
Disclosure of Directed Rule Makings..............................     6
Federal Advisory Committee Act...................................     6
Unfunded Mandates Statement......................................     6
Earmark Identification...........................................     7
Committee Estimate...............................................     7
Budget Authority and Congressional Budget Office Cost Estimate...     7
Changes in Existing Law Made by the Bill, as Reported............     8

                     Committee Statement and Views

                          PURPOSE AND SUMMARY

    H.R. 3031, the TSP Modernization Act of 2017, expands 
withdrawal options for Thrift Savings Plan (TSP) participants. 
The TSP is a 401(k)-equivalent retirement account for Federal 
employees. H.R. 3031 increases the flexibility and control 
Federal employees have over their accounts to bring the TSP in 
line with private sector rules. It allows participants to make 
multiple partial withdrawals from their TSP accounts after 
separation from Federal service and permits participants, who 
are current employees, to make multiple age-based partial 
withdrawals. H.R. 3031 also enables separated participants who 
previously elected to withdraw their money using periodic 
payments to change that election as long as they do not return 
any payments already made. Finally, the bill eliminates the 
withdrawal election deadline and the default election of an 
annuity purchase if a participant does not make a withdrawal 
election by the deadline.

                  BACKGROUND AND NEED FOR LEGISLATION

    The Federal Employees' Retirement System Act of 1986 
established the TSP.\1\ The TSP is administered by the Federal 
Retirement Thrift Investment Board (FRTIB). For employees 
covered by the Federal Employees Retirement System (FERS), the 
TSP is the defined contribution portion of the tripartite 
retirement system that also includes a defined benefit pension 
and Social Security.
---------------------------------------------------------------------------
    \1\Federal Employees' Retirement System Act of 1986, Pub. L. 99-
335.
---------------------------------------------------------------------------
    Participation in the TSP brings advantages over private 
sector defined contribution systems. The design of the system 
is simple and allows for passive investment management.\2\ 
Investors may purchase shares in any of the five core 
investment funds, including the Government Securities 
Investment Fund (G Fund), the Fixed Income Index Investment 
Fund (F Fund), the Common Stock Index Investment Fund (C Fund), 
the U.S. Small Capitalization Stock Index Investment Fund (S 
Fund), and the International Stock Index Investment Fund (I 
Fund).\3\ Investors may also purchase ``lifecycle'' funds that 
are comprised of a mix of the core investment funds, allowing 
the FRTIB to select an appropriate mix of shares depending on 
when the investor is expected to begin withdrawing funds.\4\
---------------------------------------------------------------------------
    \2\See e.g. the Thrift Savings Plan's lifecycle funds; Thrift 
Savings Plan, Lifecycle Funds, https://www.tsp.gov/InvestmentFunds/
FundOptions/index.html (last visited Oct. 3, 2017).
    \3\Thrift Savings Plan, Thrift Savings Plan Investment Funds: Fund 
Management, https://www.tsp.gov/InvestmentFunds/FundsOverview/
index.html (lasted visited July 28, 2017).
    \4\Id.
---------------------------------------------------------------------------
    Another advantage of utilizing the TSP is its low 
administrative costs. In 2016, the expense ratio for the TSP 
was 3.8 basis points, one of the lowest in the industry.\5\ The 
reason for these low costs is the simple plan structure and 
passive investment management that result from using low-cost 
index funds such as the C and S Funds, which are designed to 
track market indices. Economies of scale also enable the TSP to 
minimize costs. As of June 2017, approximately 90 percent of 
FERS employees participated in the TSP, with over $500 billion 
invested.\6\
---------------------------------------------------------------------------
    \5\Thrift Savings Plan, Expense Ratio, https://www.tsp.gov/
InvestmentFunds/FundsOverview/expenseRatio.html (last visited Oct. 3, 
2017).
    \6\Fed. Retirement Thrift Investment Bd., Thrift Savings Fund 
Statistics--June 2017 (2017).
---------------------------------------------------------------------------
    Although the TSP offers many advantages, the current 
withdrawal rules for TSP accounts can be restrictive. In-
service TSP participants may make only one age-based partial or 
full withdrawal after they reach the age of 59\1/2\. Separated 
participants are also limited to only one partial withdrawal. 
After, only a full-withdrawal option is available to separated 
employees. A TSP participant is not allowed to take a partial 
withdrawal once separated from federal service if he or she 
took an in-service age-based withdrawal. Finally, if a 
separated employee elects to withdraw his or her full balance 
via periodic payments, the payments cannot be stopped unless a 
participant withdraws his or her entire remaining balance. The 
separated employee cannot elect to switch to a partial 
withdrawal or annuity purchase.\7\
---------------------------------------------------------------------------
    \7\Memorandum from Greg Long, Exec. Dir., Fed. Retirement Thrift 
Investment Bd., to Bd. Members Kennedy, Bilyeu, Jones, McCray, and 
Jasien, Fed. Retirement Thrift Investment Bd., TSP Withdrawal Options 
4-5 (July 7, 2015) [hereinafter ``FRTIB Memo''].
---------------------------------------------------------------------------
    The law also requires TSP participants to make a post-
separation withdrawal election by April 1 of the year following 
the year in which a participant turn 70\1/2\ and are separated 
from federal service. This withdrawal election deadline is 
independent of the Internal Revenue Service requirement to 
begin annual minimum distributions by April 1 of the year 
following the year in which the participant is 70\1/2\ years 
old and separated from federal service.\8\ The law requires 
that the FRTIB purchase an annuity for a TSP participant if he 
or she fails to make an election by the TSP withdrawal election 
deadline.\9\
---------------------------------------------------------------------------
    \8\ Id. at 5.
    \9\5 U.S.C. Sec. 8433(f)(2).
---------------------------------------------------------------------------
    In 2014 and 2015, the FRTIB examined TSP data and 
discovered many participants were transferring their plan 
balances from the TSP to other financial institutions at age 
59\1/2\ and upon separation from federal employment. In 2013 
alone, separated participants transferred $9 billion out of the 
TSP to other financial institutions, most of which have higher 
expenses than the TSP, thereby ``reduc[ing] a participant's net 
returns and negatively impact[ing] his/her retirement 
readiness.''\10\ Of these participants, 27 percent cited a 
desire for additional withdrawal flexibility as a motivating 
factor behind these transactions, and 36 percent cited the need 
for funds to address life events.\11\ Among those who took age-
based withdrawals, 30 percent desired additional withdrawal 
flexibility, and 52 percent needed the funds to address life 
events.\12\ Agents for the TSP's customer service phone line 
also report significant dissatisfaction with what participants 
consider are overly restrictive withdrawal options.\13\
---------------------------------------------------------------------------
    \10\FRTIB Memo supra note 7, at 1.
    \11\Id., at 3.
    \12\Written leg. proposal from Fed. Retirement Thrift Investment 
Bd. to H. Comm. on Oversight & Gov't Reform, Proposal for Withdrawal 
Flexibility from the Thrift Savings Plan 1 (no date).
    \13\FRTIB Memo, supra note 7, at 3.
---------------------------------------------------------------------------
    As part of its study, the FRTIB looked at the reasons for 
the current restrictive withdrawal options. According to the 
Board, defined contribution systems were still relatively new 
at the time of the TSP's creation. A decision was made to model 
the withdrawal options based on the defined benefit pension 
administered by the U.S. Office of Personnel Management (OPM).

          The TSP initially had a withdrawal scheme that was 
        designed to mimic a participant's eligibility for the 
        OPM defined benefit annuity. Effectively, only 
        participants that reached the age and service 
        requirements that qualified them for a defined benefit 
        payout could execute a TSP withdrawal that would result 
        in a direct payment to the participant.
          All other separated participants were required to 
        transfer their accounts to an [individual retirement 
        account] or another qualified plan. This structure 
        proved confusing to participants and was modified 
        several times through legislative changes. . . . Each 
        change brought the TSP's withdrawal options more in-
        line with those commonly found in ERISA [Employee 
        Retirement Income Security Act] governed 401(k) 
        plans.\14\
---------------------------------------------------------------------------
    \14\ Id. at 2.

    Despite these past changes, the FRTIB study found the TSP's 
current withdrawal options continue to vary from plans found in 
the private sector. To bridge this gap, the study recommended 
allowing participants to take multiple partial distributions 
once separated and allowing participants who take in-service, 
age-based withdrawals to take partial distributions once 
separated, both of which are options found in many private 
sector plans.\15\ The FRTIB also reviewed a Vanguard 2013 study 
of private sector defined contribution plans that looked at the 
effects of allowing multiple partial withdrawals as one nears 
retirement and after separating from service. The study found 
increased withdrawal flexibilities for participants produced a 
50 percent increase in plan retention of participants and 
assets.\16\
---------------------------------------------------------------------------
    \15\ Id. at 3.
    \16\Vanguard, Retirement Distribution Decisions Among DC 
Participants 10 (2013).
---------------------------------------------------------------------------
    H.R. 3031 addresses these problems by providing additional 
withdrawal flexibility to TSP participants. The bill allows TSP 
participants to make multiple partial withdrawals post-
separation, and it eliminates the prohibition on making a post-
separation partial withdrawal if a participant has taken an in-
service, age-based withdrawal. It allows separated employees to 
stop periodic payments of their account balance as long as they 
do not return any money that was already dispensed. The 
participants may then elect for a partial withdrawal or 
purchase an annuity. The bill removes the requirement that TSP 
participants make a withdrawal election by the withdrawal 
election deadline--the year following the year in which they 
turn 70\1/2\--and removes the requirement that the FRTIB 
purchase an annuity for any employee who has not made an 
election by the withdrawal deadline. Finally, the bill allows 
in-service employees to make multiple age-based withdrawals.

                          LEGISLATIVE HISTORY

    On June 23, 2017, Representative Elijah Cummings (D-MD), 
the Ranking Minority Member of the Committee, introduced H.R. 
3031, the TSP Modernization Act of 2017, with Representative 
Mark Meadows (R-NC). H.R. 3031 was referred to the Committee on 
Oversight and Government Reform. The Committee considered H.R. 
3031 at a business meeting on July 19, 2017, and ordered the 
bill reported favorably by voice vote.
    Senator Rob Portman (R-OH) and Senator Thomas Carper (D-DE) 
introduced S. 873, the Senate companion to H.R. 3031, on April 
6, 2017. The Senate Committee on Homeland Security and 
Governmental Affairs considered S. 873 at a business meeting on 
July 26, 2017 and ordered the bill reported favorably by voice 
vote.

                           Section-by-Section

Section 1. Short title

    The short title is the ``TSP Modernization Act of 2017''.

Sec. 2. Thrift Savings Plan Account Withdrawal Flexibility

    This section amends section 8433 of title 5, United States 
Code, and includes related stand-alone provisions and 
conforming changes. The amendments include removing a 
prohibition on Thrift Savings Plan (TSP) participants who have 
separated from government service making a partial post-
separation withdrawal from their TSP account if they made a 
partial withdrawal during their in-service period. It also 
allows separated TSP participants to make more than one partial 
withdrawal.
    This section would prohibit a TSP participant who has 
elected to withdraw money from the participant's TSP account by 
purchasing an annuity, from changing that election on or after 
the date on which such annuity contract is purchased. A TSP 
participant who has separated from service may not return a 
payment that was made pursuant to a withdrawal election. The 
revised section will allow separated employees to change their 
withdrawal elections, even after receiving periodic payments 
from their TSP account, as long as they do not return any money 
already dispensed from their TSP accounts. Separated employees 
will be allowed to change from periodic payments to partial 
withdrawals or annuity contracts.
    Section 2 also removes a withdrawal election deadline and 
the requirement for FRTIB to purchase an annuity for a TSP 
participant if a participant has not made a withdrawal election 
by April 1 of the year after the participant reaches the age of 
70\1/2\. This gives TSP participants additional time to 
consider their withdrawal options, while not changing the 
Internal Revenue Service required minimum distribution rules.
    Finally, the section removes a limitation allowing a TSP 
participant who is still employed by the federal government to 
make a withdrawal after reaching the age of 59\1/2\ only one 
time while still employed by the Federal Government.

                       Explanation of Amendments

    There were no amendments to H.R. 3031 offered or agreed to 
during Committee consideration of the bill.

                        Committee Consideration

    On July 19, 2017, the Committee met in open session and, 
with a quorum being present, ordered the bill favorably 
reported by voice vote.

                            Roll Call Votes

    There were no roll call votes during consideration of H.R. 
3031.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill expands withdrawal options for TSP participants. As 
such, this bill does not relate to employment or access to 
public services and accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goal or objective of this bill is to provide for flexibility in 
making withdrawals from a Thrift Savings Plan account.

                    Duplication of Federal Programs

    In accordance with clause 2(c)(5) of rule XIII no provision 
of this bill establishes or reauthorizes a program of the 
Federal Government known to be duplicative of another Federal 
program, a program that was included in any report from the 
Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The legislation requires the Executive Director of the 
FRTIB to prescribe such regulations as are necessary to carry 
out the amendments made by the bill.

                     Federal Advisory Committee Act

    The Committee finds the legislation does not establish or 
authorize the establishment of an advisory committee within the 
definition of Section 5(b) of the appendix to title 5, United 
States Code.

                      Unfunded Mandates Statement

    Pursuant to section 423 of the Congressional Budget and 
Impoundment Control Act (Pub. L. 113-67) the Committee has 
included a letter received from the Congressional Budget Office 
below.

                         Earmark Identification

    This bill does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the House of Representatives.

                           Committee Estimate

    Pursuant to clause 3(d)(2)(B) of rule XIII of the Rules of 
the House of Representatives, the Committee includes below a 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.

   New Budget Authority and Congressional Budget Office Cost Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the House of 
Representatives, the cost estimate prepared by the 
Congressional Budget Office and submitted pursuant to section 
402 of the Congressional Budget Act of 1974 is as follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 16, 2017.
Hon. Trey Gowdy,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3031, 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.

H.R. 3031--TSP Modernization Act of 2017

    H.R. 3031 would expand the withdrawal options for 
participants in the Thrift Savings Plan (TSP), the federal 
government's defined-contribution retirement plan. Currently, 
employees may only make one partial withdrawal after they turn 
59\1/2\ while employed or one such withdrawal after they 
retire. Enacting H.R. 3031 would allow an unlimited number of 
such withdrawals.
    The staff of the Joint Committee on Taxation estimate that 
enacting H.R. 3031 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 amounts withdrawn; 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 H.R. 3031 would not increase 
net direct spending or significantly increase on-budget 
deficits in any of the four consecutive 10-year periods 
beginning in 2028.
    This 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.
    The CBO staff contact for this estimate is Dan Ready. The 
estimate was approved by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *

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) This section applies to any employee who--
          (1) separates or enters leave-without-pay status in 
        order to perform military service; and
          (2) is subsequently restored to or reemployed in a 
        position which is subject to this chapter, pursuant to 
        chapter 43 of title 38.
  (b)(1) Each employee to whom this section applies may 
contribute to the Thrift Savings Fund, in accordance with this 
subsection, an amount not to exceed the amount described in 
paragraph (2).
          (2) The maximum amount which an employee may 
        contribute under this subsection is equal to--
                  (A) the contributions under section 8432(a) 
                which would have been made, over the period 
                beginning on date of separation or commencement 
                of leave-without-pay status (as applicable) and 
                ending on the day before the date of 
                restoration or reemployment (as applicable); 
                reduced by
                  (B) any contributions under section 8432(a) 
                or 8440e actually made by such employee over 
                the period described in subparagraph (A).
          (3) Contributions under this subsection--
                  (A) shall be made at the same time and in the 
                same manner as would any contributions under 
                section 8432(a);
                  (B) shall be made over the period of time 
                specified by the employee under paragraph 
                (4)(B); and
                  (C) shall be in addition to any contributions 
                then actually being made under section 8432(a).
          (4) The Executive Director shall prescribe the time, 
        form, and manner in which an employee may specify--
                  (A) the total amount such employee wishes to 
                contribute under this subsection with respect 
                to any particular period referred to in 
                paragraph (2)(B); and
                  (B) the period of time over which the 
                employee wishes to make contributions under 
                this subsection.
        The employing agency may place a maximum limit on the 
        period of time referred to in subparagraph (B), which 
        cannot be shorter than two times the period referred to 
        in paragraph (2)(B) and not longer than four times such 
        period.
  (c)(1) If an employee makes contributions under subsection 
(b), the employing agency shall make contributions to the 
Thrift Savings Fund on such employee's behalf--
                  (A) in the same manner as would be required 
                under section 8432(c)(2) if the employee 
                contributions were being made under section 
                8432(a); and
                  (B) disregarding any contributions then 
                actually being made under section 8432(a) and 
                any agency contributions relating thereto.
          (2) An employee to whom this section applies is 
        entitled to have contributed to the Thrift Savings Fund 
        on such employee's behalf an amount equal to--
                  (A) the total contributions to which that 
                individual would have been entitled under 
                section 8432(c)(2), based on the amounts 
                contributed by such individual under section 
                8440e (other than under subsection (d)(2) 
                thereof) with respect to the period referred to 
                in subsection (b)(2)(B), if those amounts had 
                been contributed by such individual under 
                section 8432(a); reduced by
                  (B) any contributions actually made on such 
                employee's behalf under section 8432(c)(2) 
                (including pursuant to an agreement under 
                section 211(d) of title 37) with respect to the 
                period referred to in subsection (b)(2)(B).
  (d) An employee to whom this section applies is entitled to 
have contributed to the Thrift Savings Fund on such employee's 
behalf an amount equal to--
          (1) 1 percent of such employee's basic pay (as 
        determined under subsection (e)) for the period 
        referred to in subsection (b)(2)(B); reduced by
          (2) any contributions actually made on such 
        employee's behalf under section 8432(c)(1) with respect 
        to the period referred to in subsection (b)(2)(B).
  (e) For purposes of any computation under this section, an 
employee shall, with respect to the period referred to in 
subsection (b)(2)(B), be considered to have been paid at the 
rate which would have been payable over such period had such 
employee remained continuously employed in the position which 
such employee last held before separating or entering leave-
without-pay status to perform military service.
  (f)(1) The employing agency may be required to pay lost 
earnings on contributions made pursuant to subsections (c) and 
(d). Such earnings, if required, shall be calculated 
retroactively to the date the contribution would have been made 
had the employee not separated or entered leave without pay 
status to perform military service.
          (2) Procedures for calculating and crediting the 
        earnings payable pursuant to paragraph (1) shall be 
        prescribed by the Executive Director.
  (g) Amounts paid under subsection (c), (d), or (f) shall be 
paid--
          (1) by the agency to which the employee is restored 
        or in which such employee is reemployed;
          (2) from the same source as would be the case under 
        section 8432(e) with respect to sums required under 
        section 8432(c); and
          (3) within the time prescribed by the Executive 
        Director.
  (h)(1) For purposes of section 8432(g), in the case of an 
employee to whom this section applies--
                  (A) a separation from civilian service in 
                order to perform the military service on which 
                the employee's restoration or reemployment 
                rights are based shall be disregarded; and
                  (B) such employee shall be credited with a 
                period of civilian service equal to the period 
                referred to in subsection (b)(2)(B).
          (2)(A) An employee to whom this section applies may 
        elect, for purposes of [section 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.
                  (B) An election under this paragraph shall be 
                made within such period of time after 
                restoration or reemployment (as the case may 
                be) and otherwise in such manner as the 
                Executive Director prescribes.
  (i) The Executive Director shall prescribe regulations to 
carry out this section.

           *       *       *       *       *       *       *

Sec. 8433. Benefits and election of benefits

  (a) An employee or Member who separates from Government 
employment is entitled to the amount of the balance in the 
employee's or Member's account (except for the portion of such 
amount forfeited under section 8432(g) of this title, if any) 
as provided in this section.
  (b) Subject to section 8435 of this title, any employee or 
Member who separates from Government employment is entitled and 
may elect to withdraw from the Thrift Savings Fund the balance 
of the employee's or Member's account as--
          (1) an annuity;
          (2) a single payment;
          (3) 2 or more substantially equal payments to be made 
        not less frequently than annually; or
          (4) any combination of payments as provided under 
        paragraphs (1) through (3) as the Executive Director 
        may prescribe by regulation.
  (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 [and who has not made a 
withdrawal under subsection (h)(1)(A) may make one withdrawal] 
may make one or more withdrawals of any amount [as a single 
payment] in the same manner as a single payment is made in 
accordance with subsection (b)(2) from the employee's or 
Member's account.
  (2) An employee or Member may request that the amount 
withdrawn from the Thrift Savings Fund in accordance with 
subsection (b)(2) be transferred to an eligible retirement 
plan.
  (3) The Executive Director shall make each transfer elected 
under paragraph (2) directly to an eligible retirement plan or 
plans (as defined in section 402(c)(8) of the Internal Revenue 
Code of 1986) identified by the employee, Member, former 
employee, or former Member for whom the transfer is made.
  (4) A transfer may not be made for an employee, Member, 
former employee, or former Member under paragraph (2) until the 
Executive Director receives from that individual the 
information required by the Executive Director specifically to 
identify the eligible retirement plan or plans to which the 
transfer is to be made.
  (5) Withdrawals under this subsection shall be subject to 
such other limitations or conditions as the Executive Director 
may prescribe by regulation.
  (d)(1) Subject to paragraph (2) and subsections (a) and (c) 
of section 8435 of this title, an employee or Member may change 
an election previously made under this subchapter, except that 
in the case of an election to receive an annuity, a former 
employee or Member may not change an election under this 
section on or after the date on which an annuity contract is 
purchased to provide for the annuity elected by the former 
employee or Member.
          (2) A former employee or Member may not [change an] 
        return a payment that was made pursuant to an election 
        under this section [on or after the date on which a 
        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)(1) If an employee or Member (or former employee or 
Member) dies without having made an election under this section 
or after having elected an annuity under this section but 
before making an election under section 8434 of this title, an 
amount equal to the value of that individual's account (as of 
death) shall, subject to any decree, order, or agreement 
referred to in section 8435(c)(2) of this title be paid in a 
manner consistent with section 8424(d) of this title.
          (2) Notwithstanding section 8424(d), if an employee, 
        Member, former employee, or former Member dies and has 
        designated as sole or partial beneficiary his or her 
        spouse at the time of death, or, if an employee, 
        Member, former employee, or former Member, dies with no 
        designated beneficiary and is survived by a spouse, the 
        spouse may maintain the portion of the employee's or 
        Member's account to which the spouse is entitled in 
        accordance with the following terms:
                  (A) Subject to the limitations of 
                subparagraph (B), the spouse shall have the 
                same withdrawal options under subsection (b) as 
                the employee or Member were the employee or 
                Member living.
                  (B) The spouse may not make withdrawals under 
                subsection (g) or (h).
                  (C) The spouse may not make contributions or 
                transfers to the account.
                  (D) The account shall be disbursed upon the 
                death of the surviving spouse. A beneficiary or 
                surviving spouse of a deceased spouse who has 
                inherited an account is ineligible to maintain 
                the inherited spousal account.
          (3) The Executive Director shall prescribe 
        regulations to carry out this subsection.
  (f)[(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] this subsection as 
if it had never occurred.
          [(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--
                  [(A) the employee, Member, former employee, 
                or former Member becomes 701/2 years of age; or
                  [(B) the employee, Member, former employee, 
                or former Member separates from Government 
                employment.]
  (g)(1) At any time before separation, an employee or Member 
may apply to the Board for permission to borrow from the 
employee's or Member's account an amount not exceeding the 
value of that portion of such account which is attributable to 
contributions made by the employee or Member. Before a loan is 
issued, the Executive Director shall provide in writing the 
employee or Member with appropriate information concerning the 
cost of the loan relative to other sources of financing, as 
well as the lifetime cost of the loan, including the difference 
in interest rates between the funds offered by the Thrift 
Savings Fund, and any other effect of such loan on the 
employee's or Member's final account balance.
          (2) Loans under this subsection shall be available to 
        all employees and Members on a reasonably equivalent 
        basis, and shall be subject to such other conditions as 
        the Board may by regulation prescribe. The restrictions 
        of section 8477(c)(1) of this title shall not apply to 
        loans made under this subsection.
          (3) A loan may not be made under this subsection to 
        the extent that the loan would be treated as a taxable 
        distribution under section 72(p) of the Internal 
        Revenue Code of 1986.
          (4) A loan may not be made under this subsection 
        unless the requirements of section 8435(e) of this 
        title are satisfied.
  (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.
          [(2) A withdrawal under paragraph (1)(A) shall be 
        available to each eligible participant one time only.]
          [(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.
          [(4)] (3) Withdrawals under paragraph (1) shall be 
        subject to such other limitations or conditions as the 
        Executive Director may prescribe by regulation.
          [(5)] (4) A withdrawal may not be made under this 
        subsection unless the requirements of section 8435(e) 
        of this title are satisfied.

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