2012 Federal Employees Almanac
Chapter 6, Section 5: Leaving Your Money in the TSP
- By Almanac Staff
- February 19, 2012
General Rules and Procedures
After you leave federal service, you can leave your entire account balance (as long as it is $200 or more) in the TSP until April 1 of the calendar year after you reach age 701⁄2 or the year following the year you separate from federal service, if later, subject to the restrictions described below. You can continue to change the way your money is allocated among the TSP investment funds by making interfund transfers, and your account will continue to reflect the performance of your chosen investment allocation.
You do not need to submit any forms until you are ready to make a withdrawal election, unless you are subject to the restrictions on leaving your money in the TSP explained below.
When you are ready to choose a withdrawal, contact the TSP Service Office or Web site for current tax information and withdrawal forms, if you need them. Submit Form TSP-70, Request for Full Withdrawal, or Form TSP-77, Request for Partial Withdrawal When Separated, depending on your preference.
Restrictions on Leaving Your Money in the TSP
TSP participants who want to leave their investments and earnings in a TSP account should keep the following rules in mind:
Automatic Cashout--If when you leave service your account balance is less than $200, your account will be automatically paid to you in a single payment; if the amount is less than $5, it will be forfeited.
Contributions, Loans and Court Orders--You cannot make any additional contributions to your account after you leave federal service, and you can no longer borrow from your account. If you have an outstanding loan at the time you separate, it must be repaid or a taxable distribution will be declared. Until the loan is closed, you will not be able to make a withdrawal. In addition, you must resolve any court orders against your account before you can make a withdrawal.
Required Election and Payment Date--You are required to withdraw your account balance in a single payment, begin receiving monthly payments, or begin receiving annuity payments by April 1 of the later of: the year following the year you become age 701⁄2; or the year following the year you separate from federal service or the uniformed services. If you do not withdraw (or begin withdrawing) your account by the required withdrawal deadline, your account balance will be forfeited to the TSP. You can reclaim your account; however, you will not receive earnings on your account from the time the account was forfeited.
Required Minimum Distributions--If you do not withdraw your account balance or begin receiving payments from your account under the requirements described above, the TSP is required to make a required minimum distribution. Your minimum distribution will be calculated based on your account balance and your age, using the IRS Uniform Lifetime Table. The TSP will notify you before this situation applies to you and send you the notice Important Tax Information about your TSP Withdrawal and
Required Minimum Distributions.
If you are separated and receiving a series of monthly payments from your TSP account when you turn 701⁄2, your monthly payments will be used to satisfy the minimum distribution requirement. If the total amount of your monthly payments does not satisfy the requirement, the TSP will issue a supplemental payment for the remaining amount in December of that year.
If you do not make a full withdrawal of your account before you turn 701⁄2, you may make a partial withdrawal through December of the year in which you turn 701⁄2. However, you must select a withdrawal option for the balance of your account before April 1 of the following year. Your partial withdrawal will be subject to the IRS required minimum distribution rules.
The minimum distribution payment cannot be transferred or rolled over. This means that if you withdraw your account in a single payment or monthly payments in a year to which the required minimum distribution applies, you cannot transfer the entire payment(s) to an IRA or an eligible employer plan. Instead, before transferring any money, the TSP will calculate your required minimum distribution amount and mail it directly to you (or, if applicable, to the savings or checking account designated to receive your direct deposit).
For detailed rules regarding minimum distributions, see the TSP tax notice
Important Tax Information About Your TSP Withdrawal and Required Minimum Distributions, available through the TSP Web site and Service Office.