How Federal Authorities Can Access TSP Loans During Closures – FCW
How Federal Authorities Can Access TSP Loans During Closures
If Congress can’t act to prevent a government shutdown on Oct. 1, the federal government will have peace of mind knowing it doesn’t have to rely on new legislation to get its pay back.
The bill that ended the 35-day government shutdown that lasted in late 2018 and early 2019 included the Fair Treatment of Government Employees Act, 2019, which requires the federal government to be paid “as soon as possible” after the close of a credit shortage.
But for Feds who miss one or more paychecks and need money to cover their expenses, options are available through Savings Plans (TSPs).
One option for government employees is to make a hardship withdrawal from their TSP account, although there are certain limits. Feds under the age of 59 and a half may be subject to a 10% penalty if they use this option.
During the 2018-2019 shutdown, the number of governments withdrawing hardship withdrawals from their retirement savings plans sharp at 12,936. After the shutdown ended, Congress saw a flurry of bills introduced to help TSP participants with a credit disruption via hardship withdrawals, although none became law.
Another possibility for federal authorities is to take out a loan against their TSP plan.
The Federal Retirement Thrift Investment Board, which administers the TSP, changed loan processes for participants after the 2018 shutdown to support cash-strapped plan participants.
Under rule changes made in early 2019, some employees pushed to the status of “unpaid” by a stoppage – employees on leave and those working without pay – can take out loans against their retirement accounts at any time during the expiration of credits and suspend those payments until the end of the funding expiration, said Kim Weaver, FRTIB’s director of external affairs.
However, federal authorities can only have one general purpose loan outstanding and one residential loan outstanding at a time, so federal authorities with general purpose loans outstanding in the last 60 days will not have any general purpose loans outstanding. are not eligible.
Participants must also have at least $ 1,000 of their own contributions and income in their account to participate, and this only applies to those unpaid due to closure, as opposed to other reasons like time off. voluntary or disciplinary suspensions.
This 2018 shutdown also revealed a problem on the loan repayment side, as federal authorities with outstanding loans did not have the means to make payments as loan payments are deducted from employee compensation.
Now, TSP participants can request a suspension of loan repayments if a shutdown lasts long enough for federal authorities to miss paychecks. Participants can also make payments directly to their online account.
As for the FRTIB itself, it is not funded by credits, so it does not close during funding deadlines, Weaver said.
Natalie Alms is a writer at FCW and covers the Federal Workforce. She recently graduated from Wake Forest University and wrote for the Salisbury (NC) Post. Connect with Natalie on Twitter at @AlmsNatalie.