DATE: JANUARY 31, 2019
TO: EMPLOYEE THRIFT ADVISORY COUNCIL
FROM: RAVINDRA DEO - EXECUTIVE DIRECTOR
SUBJECT: CHANGE TO TSP REGULATION ON LOAN ELIGIBILITY
As you know, the shutdown caused TSP participants to access their accounts through loans and hardship withdrawals. We saw a 5% increase in loans and a 26% increase in hardship withdrawals since December 26th. Our regulation currently says that individuals in “non-pay” status are not eligible to take a new loan. In our Fact Sheet, we state that if the shutdown was going to last less than 30 days, a participant could take a new loan. We provided that additional time frame as a grace period. However, that was not sufficient in the most recent partial shutdown.
As a result, we consulted with the IRS about this issue. I have made the decision to issue an interim rule that will allow TSP participants affected by a lapse in appropriations to take a loan and to immediately suspend payment on that loan. This interim rule will be effective immediately. We will undertake the longer notice and comment rule-making, however, if another shutdown occurs in the near future, we want to be in a position to provide assistance to our participants immediately.