This bulletin discusses the actions that agency representatives must take when a Thrift Savings Plan (TSP) participant separates from Federal service.
TSP participants are FERS and CSRS1 employees who have TSP accounts, even if they are not currently contributing. FERS employees receive Agency Automatic (1%) Contributions, so all FERS employees are TSP participants. CSRS employees may or may not be TSP participants. If you cannot verify the existence of a TSP account by any other means, contact your Agency Technical Services (ATS) representative.
I. Agency Responsibilities
When a TSP participant separates from Federal service, agency representatives must:
- Verify ALL the personal information on file with the TSP. If the participant is covered by FERS, this includes the TSP service computation date (TSP-SCD) and the TSP vesting code. (See TSP Bulletin 15-1, Thrift Savings Plan Vesting Requirements and the TSP Service Computation Date, dated July 9, 2015 for more information about vesting and the TSP-SCD.)
- Timely submit an Employee Data (06) Record (EDR) to the TSP to update the separation code and the separation code date, and to provide the corrections or updates made to any other fields. (See TSP Bulletin 05-8, Thrift Savings Plan Employment Code, dated July 19, 2005 for more information.)
- Remind the participant that he or she will be responsible for updating his or her address of record following separation. Separated participants can update their address by calling the ThriftLine (1-877-YOU-FRST), by logging into the online account section of the TSP website, or by submitting Form TSP-9, Change in Address for Separated Participant.
- Explain the post-separation options to the participant. (See Section II)
- Explain that additional withdrawal information and forms are available on the TSP website, www.tsp.gov.
Because separating participants may choose to leave their money in the TSP, agencies should NOT provide them with withdrawal packages. Instead, agencies should direct separating participants to the TSP website, where the most recent versions of TSP materials may be found. This will help ensure that participants do not use an obsolete form when they eventually chose a withdrawal option. A limited selection of materials is also available by calling the ThriftLine.
II. Post-Separation Options
Participants with balances of less than $200 at separation will automatically receive their entire account balance in a single payment.
Participants with balances of $200 or more at separation may choose to simply leave their money in the TSP. During this period, they can continue to manage their accounts by making interfund transfers, and may also roll money into their TSP account from other qualified plans or IRAs. These participants will still have the full range of TSP withdrawal options whenever they choose, and will continue to take advantage of the TSP’s low administrative fees. Participants need not make a withdrawal decision until they turn 70½ (see the information on Required Minimum Distributions below).
Participants have several options when they decide to withdraw their money from the TSP, including:
- Receiving scheduled monthly payments from the TSP;
- Purchasing a life annuity;
- Taking a partial withdrawal (provided they did not take an age-based, in-service withdrawal);
- Withdrawing their account as a single payment; or
- A combination of the above methods.
Separated participants who have a civilian and a uniformed services account also have the option of combining both accounts into one using Form TSP-65. For more information about combining TSP accounts, along with all the other options available to participants who have separated from Federal service, see the booklet, Withdrawing Your TSP Account After Leaving Federal Service, and the regulations at 5 CFR § 1650.
Although not required to withdraw their entire account balance, separated participants must begin to receive payments by April 1 following the calendar year they become age 70½, at which point they also become subject to the Internal Revenue Code’s Required Minimum Distribution (RMD) rules. Participants who are still Federal employees at age 70½ must begin to receive payments by April 1 following the calendar year of their separation from Federal service. When participants elect to receive scheduled monthly payments, the TSP will ensure the amount received satisfies their annual RMD. More information about withdrawal requirements and RMDs may be found in the TSP Tax Notice, Important Tax Information About Your TSP Withdrawal and Required Minimum Distributions.
In an effort to make the withdrawal process easier for participants, and to prevent the submission of incorrectly completed forms, the FRTIB recommends participants use the online “withdrawal wizard” to fill out the appropriate withdrawal form(s) electronically. The withdrawal wizard is available to all separated participants by logging into the online account section of the TSP website and choosing “Withdrawals” from the Online Transactions menu.
To learn more about the available current withdrawal options, agency representatives may want to attend the free training offered by the FRTIB. Specifically, we offer a two-day overview course on all aspects of the TSP. Upon successful completion of the two-day course, agency representatives may attend a more detailed one-day course on the TSP withdrawal options. For more information on TSP training, see the Training Information section of the TSP website.
1 FERS refers to the Federal Employees’ Retirement System, the Foreign Service Pension System, and other equivalent Federal retirement systems. CSRS refers to the Civil Service Retirement System, including CSRS Offset, the Foreign Service Retirement and Disability System, and other equivalent Federal retirement systems.