for Agency and Service TSP Representatives
New Options and Processes for Changes to Installment Payments
The purpose of this bulletin is to notify agencies/services that the Federal Retirement Thrift Investment Board (FRTIB) has implemented new options and processes for participants receiving installment payments (previously called monthly payments) as a result of the TSP Modernization Act of 2017. These changes take effect on September 15, 2019.
This bulletin supersedes TSP Bulletins 12-21 and 12-U-18, Consolidation and Revision of Previous Forms TSP-73, Change In Monthly Payments (Civilian) and TSP-U-73, Change In Monthly Payments (Uniformed Services); Creation of Form TSP-78, Monthly Payments Maintenance and Form TSP-79, Change From Monthly Payments to Final Payment, dated October 22, 2012.
Any copies of Form TSP-73/TSP-U-73, Change in Monthly Payment Amount, Form TSP-78, Monthly Payments Maintenance, and Form TSP-79, Change From Monthly Payments to Final Payment, with a date prior to September 2019 are obsolete and will no longer be processed. Those obsolete forms should be immediately discarded (recycled), and agencies/services that provide links to electronic versions of those forms should disable those links.
Requirements for Installment Payment Changes
Civilian, uniformed services, and beneficiary participants who are receiving installment payments are able to make changes to the way those installment payments are handled. Participants can stop installment payments; change the frequency, amount, or source (traditional or Roth) of payments; and make other changes regarding direct deposit, tax withholding, and transferring to an IRA or eligible employer plan. These changes can be made at any time.
Changes to Installment Payments
The FRTIB has made the following changes related to installment payments:
- Participants can take monthly, quarterly, or annual installment payments and can change that frequency at any time.
- Participants can change the dollar amount of their installment payments at any time. Note: If a participant is receiving life-expectancy payments and changes the frequency or amount of those payments, the participant will be automatically changing from life-expectancy to dollar amount payments. The participant will not be able to change back to payments based on life expectancy.
- Participants are able to choose whether their payments come from their Roth balance or traditional balance first, or pro rata from both. If a participant chooses to receive installment payments as “Roth first” or “Traditional first,” the installment payments will be taken first from the source chosen (Roth or traditional). However, if that source has insufficient funds to make payments, those payments will automatically switch to being made from the other source. Payments will not stop until the participant elects to stop them or there is insufficient funds in the entire participant account. If a participant chooses the “pro rata” option, payments will be taken from both types in the proportion of the participant’s entire account.
- Participants are able to take partial withdrawals while they are receiving installment payments.
Tax Implications for Making Changes to Installment Payments
Payments expected to last 10 years or more and payments based on life expectancy have different tax withholding requirements from those expected to last less than 10 years, and they are not eligible to be transferred. If a participant’s change request puts payments in a different duration category, the TSP will automatically change the withholding to the default for the new duration or to any allowable option chosen by the participant. If a participant is currently transferring all or part of the installment payments to an IRA or eligible employer plan and the change request makes the payments ineligible for transfers (by changing their expected duration to 10 years or more), the participant’s transfers will stop. Participants should be aware of these tax implications before they make changes to their installment payments. The TSP tax notice Tax Information for TSP Participants Receiving Installment Payments
Requesting Changes to Installment Payments
Participants should use the online tool on the TSP website (tsp.gov) to make changes to their installment payments. To access the tool, participants must log into My Account and click on “Withdrawals and Changes to Installment Payments,” then click on “Changes to Installment Payments.” This online tool will guide the participant through the request by prompting the participant to answer questions. Based on those answers, the online tool will generate Form TSP-95 (WEB), Changes to Installment Payments, which is a summary of the request with the participant’s provided information. Depending on the circumstances, the request may be completed entirely online. If signatures or additional information is required, the participant will need to print the form, gather the necessary signatures, have the form notarized, and then send it to the TSP. Note: The pages included in Form TSP-95 (WEB) will be variable, depending on what the TSP requires in a given case. If a participant alters any of the pre-printed information on the TSP-95 (WEB) form, the form will not be processed.
Additional Information for Participants
The TSP booklet Withdrawing From Your TSP Account for Separated and Beneficiary Participants provides information about the TSP withdrawal options and how they affect participants’ accounts. Agency/Service representatives should strongly recommend that participants read this booklet and the TSP tax notice Tax Information for TSP Participants Receiving Installment Payments before requesting a withdrawal.