New TSP Proposal to Make Changes to Withdrawal Choices by Kara Jones
As per Kara Jones, The FRTIB (Federal Retirement Thrift Investment Board) put up a proposal in the Federal Register so that it can create more hardship withdrawal selections in the TSP (Thrift Savings Plan).
Kara Jones said If the proposed rule goes through, TSP account holders would be able to take hardship withdrawals for damages, losses, or spending due to natural disasters.
Currently, in-service distributions can be taken from the TSP if you are in one of the following situations:
- You are in the red when it comes to money on a monthly basis.
- If you, your spouse, or children have a health event, some medical costs can be qualified.
- Expenses for fixing, restoring, or replacing things of property due to a personal casualty loss.
- Lawyer and court expenses in relation to the account holder’s divorce.
Before, these rules, exceptions, and assistance were made by the IRS on whether or not participants were allowed to make withdrawals due to a disaster. They would make disaster relief public announcements to let account holders with private sector 401(k)s take hardship withdrawals. However, they will no longer issue these announcements as natural disasters are now listed as a safe harbor withdrawal if the disaster event was announced to be a natural disaster by the FEMA (Federal Emergency Management Agency). As well, the account holder’s main residential property or workplace was in the location that FEMA listed for individual help due to the disaster event.
Kara Jones said This change by the IRS has spurred the agency in charge of the TSP to propose the same rule, specifically with the Thrift Savings Plan. If an account holder’s natural disaster qualifies for the rules that the IRS has made, they will be able to make hardship withdrawals, which cover losses and spending due to the disaster.
There are three more days until the comments on the posted proposal are closed for consideration by March 16th.
