Thrift Savings Plan Emergency Withdrawal Act of 2025

Penalty-free Thrift Savings withdrawals for federal retirees

If enacted, this bill would let certain former federal employees take distributions from their Thrift Savings Plan without the 10% early-withdrawal tax. Up to $100,000 of such distributions could get this treatment. Unless you opt out for a taxable year, the taxable amount would be spread evenly over three tax years starting in the year of the distribution. This applies only to TSP distributions made between the date you elect an annuity after leaving federal civil service and one year after you receive your first annuity payment after OPM finalizes your annuity claim (interim payments excluded). You could elect within one year to treat the payment as an eligible rollover distribution and then repay (roll over) up to the distributed amount into an eligible retirement plan within three years. The bill says these repayments are treated as direct trustee-to-trustee transfers for timing and reporting, and it also states that these qualified distributions are not treated as eligible rollover distributions for sections 401(a)(31), 402(f), and 3405. The rule would apply to distributions made after January 20, 2025.