The CARES Act, enacted earlier this year, allows the Thrift Board to offer temporary loan and withdrawal options to TSP participants affected by COVID-19. Recently, the Board announced that the new loan options will be available no later than June 22, 2020, and that the new withdrawal option will be available in mid-July 2020. Both the loan and withdrawal options are available to qualified individuals that meet one or more of the following criteria:

· You have been diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention.

· Your spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) has been diagnosed with such virus or disease by such a test.

· You are experiencing adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, are unable to work because of lack of child care due to such virus or disease, own or operate a business that closed or reduced hours due to such virus or disease, or other factors as determined by the Secretary of the Treasury.

LOANS

Increased Maximum Loan Amount

The maximum loan amount is increased from $50,000 to $100,000, and the portion of your available balance you can borrow is raised from 50% to 100%. The deadline for applying for a loan with this increased maximum will be in September 2020, but an exact cutoff date is expected to be announced soon.

Temporary Suspension of Loan Payments

You may suspend your obligation to make payments on your TSP loan or loans for 12 months, which will also extend the term of your loan by the same amount of time. This applies to existing loans and loans taken this year. TSP will make a new form available for you to request this suspension and you will have until December 31, 2020, to request it.

WITHDRAWALS

The CARES Act creates special rules for most types of TSP withdrawals made by participants affected by COVID-19. In addition, TSP is working on a new, temporary withdrawal option that waives the usual in-service withdrawal requirements and allows all COVID-affected participants to waive tax withholding. TSP will provide additional details about this new option soon.

In the meantime, many TSP participants who are affected by COVID-19 can take advantage of the withdrawal provisions of the CARES ACT using withdrawal types for which they are already eligible, including hardship withdrawals and age-based, in-service “59½” withdrawals for current federal employees and single payments and some installment payments for those who are separated from federal service or are beneficiary participants.

You must be a qualified individual receiving a coronavirus-related distribution to take advantage of the favorable tax treatment described below. A coronavirus-related distribution is “a distribution (withdrawal) that is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.” That means these tax advantages can be applied to a maximum of $100,000 across all your retirement plans combined. You must also designate your withdrawal(s) as a coronavirus-related distribution when you file your taxes. To do that, the IRS is expected to make Form 8915-E available before the end of the year.

Early Withdrawal Penalty Waived

The IRS will waive the 10% additional tax on early distributions if you designate your withdrawal(s) as a coronavirus-related distribution when you file your taxes.

When You Must Pay Tax on the Income from Your Withdrawal

The taxable income from withdrawals made by qualified individuals may be included in your income in the year of the withdrawal or spread “ratably” over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you could report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022.

Repaying Withdrawals

If you are a qualified individual, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided you complete the repayment within three years after the date that you received it. If you repay it within three years, the distribution will be treated as though it were repaid in a direct plan-to-plan transfer so that you do not owe federal income tax on the distribution. Coronavirus-related distributions may be repaid to the plan from which you received it or to another eligible retirement plan.

These new options should help ease the financial burden for TSP participants impacted by the pandemic. You can find more information at www.tsp.gov.

Anthony M. Reardon

National President