The New TSP Transition Update

The New TSP Transition Update

Amid thousands of individuals struggling to make new changes or access their accounts, the federal government’s retirement savings program officials have opted to add new transitional updates. These updates are mostly related to introducing a new recordkeeping service.

Thrift Savings Plan’s website shows all the changes and updates implemented. The transitions include updating the login process and making it more secure and a mobile application. Moreover, the account landing page has undergone a redesign, and the admin approved access to around five thousand mutual funds. Best of all, the new updates include the option of electronically signing documents. The transitional updates involve modernizing many of the website’s old back-end processes.

However, trying to implement these new updates is easier said than done. According to several TSP participants, problems, such as difficulties setting up new accounts, unapproved changes to the ceiling amount they could borrow, and delays in fund distributions, have been popping up.

Kim Weaver, the spokeswoman for TSP, provided an update about the cause of this issue. Regarding the maximum amount participants could borrow, Kim Weaver revealed that TSP has changed how the ceiling amount is calculated. Though the change had been posted to the Federal Register, TSP had not notified nor advertised the change to the relevant concerned parties. She said, “We did not include this change in our messaging before the transition. This was an omission, and we apologize to our participants who have been affected.”

TSP calculated the loan amount through a different formula before the updates. The lesser amount of 50% of your already vested account balance minus the loan amount you have already taken. However, if the vested account balance was less than $10,000, you had the provision for borrowing the lesser of $10,000, your full account value, or around $50,000 with conditions. The conditions included subtracting any outstanding loan balance, provided it was within the previous 12 months and all of your employer’s combined qualified plans.

With the new change, the calculation method is based on the smallest option of the three. It includes your contributions plus earnings from the TSP account while ignoring any outstanding loan amount. Or 50% of your total account balance, including the contributions and the gains. Or $10,000, whichever is greater, less any remaining loan amount, or $50,000 less your outstanding loan balance amount during the last 12 months.

Participants had also complained about the expected delay of their June 2022 payments. According to Weaver, These participants had misinterpreted the message sent to them. The statement included the term ‘disbursed on time,’ meaning that the TSP funds release is as per the schedule. Individuals with electronic fund transfers might face delays extending to a day or two to receive the value in their bank account. The wait is related to banks’ different agreements with the treasury department and is outside TSP’s control.

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