Federal employees who invest in the Thrift Savings Plan withdraw more than $9 billion annually from the government retirement fund, due in part to its strict rules on withdrawals. Now two senators have introduced a bill to relax those TSP restrictions.

Sens. Rob Portman (R-Ohio) and Tom Carper (D-Del.) introduced the TSP Modernization Act on Thursday, which would let federal retirees make multiple post-separation withdrawals from the TSP instead of the two currently allowed.

Introduced at the TSP’s request, the Carper-Portman bill would:

• Eliminate the restriction that participants cannot take partial post-separation withdrawals if they’ve already taken an age-based in-service withdrawal.
• Permit multiple post-separation withdrawals.
• Allow multiple age-based withdrawals while a participant is still working.
• Allow participants to stop monthly payments and elect to purchase an annuity while receiving monthly payments.

“Making smart choices to prepare for retirement can be difficult, but everyone deserves to have financial stability at the end of their career,” Carper said in a statement. “The Thrift Savings Plan is a tool our hard-working federal employees count on to plan for their futures, but we need to make it work better for them.

While the TSP has some of the lowest fees of any 401(k) retirement fund, surveys about the fund have shown that federal workers move more than $9 billion out of the TSP and into higher-fee private funds due to the TSP’s limits on withdrawals. Under the current rules, TSP investors are only allowed one age-based withdrawal, at 59 1/2 years of age, during active government employment.

“We are very appreciative of Sens. Portman and Carper’s leadership on this important issue,” said Greg Long, executive director of the Federal Retirement Thrift Investment Board. “Enactment of this legislation will meaningfully improve TSP participants’ ability to responsibly access their retirement savings.”

When TSP account holders retire or leave government service for another job, about 60 percent of account holders leave in the money in the government retirement fund, while 40 percent move their retirement nest egg into a private fund.

“The TSP has been instrumental in helping federal employees maximize their retirement security, and to mark the 30th anniversary of this critical savings vehicle this bill takes important steps to modernize this system to benefit them in the future,” said Portman.

The Congressional Budget Office has yet to score the Portman-Carper bill, but the senators project the bill, if passed, could achieve cost savings if it results in earlier, taxable withdrawals from the TSP.

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