Employees must meet the eligibility requirements to participate in the TSP loan program. Married FERS TSP participants must also have their spouse’s consent. To grant consent, the spouse must sign the loan agreement that the TSP sent to the FERS TSP participant.
The TSP will notify the spouses of married CSRS TSP participants who apply for a TSP loan.
More information about the TSP loan program is available at www.tsp.gov, by calling the ThriftLine, and in the booklet TSPBK04, Loans.
Residential loans are only for the purchase or construction of a primary residence. These loans require documentation, and have a repayment term of 1 to 15 years.
Employees may use general-purpose loans for any purpose. These loans do not require documentation and have a repayment term of 1 to 5 years.
596.31 TSP-20, Thrift Savings Plan Loan Application
The TSP provides TSP-20, Thrift Savings Plan Loan Application, to any eligible employee who requests it. The employee is responsible for completing the form and submitting it to the TSP. TSP Loan applications may also be completed at www.tsp.gov.
Residential loans require documentation as specified by the TSP. Following the acceptance of a completed loan application, the TSP will request the necessary documentation from the employee along with the loan agreement.
Regularly scheduled loan payments are made through payroll deductions. The following provisions apply:
- After the TSP disburses the loan, the TSP will notify Eagan ASC to begin immediately deducting loan payments from the employee’s salary each pay period. Loan payments must start within 60 days of disbursement.
- The employee must ensure that correct loan payments are submitted on time. Even if the Postal Service was responsible for a missed loan payment, the employee must pay the missed amount directly to the TSP, using his or her personal funds, to avoid a taxable distribution. Eagan ASC will not make up missed payments from the employee’s paycheck. Employees must regularly check their earnings and leave statement to be sure that loan payments have started in the correct amount.
- Employees must review their TSP statements and report any discrepancies to the Postal Service. Employees can review their loan payments in the following ways:
- Quarterly and annual participant statements.
- Logging onto “My Account” on the TSP website to review loan payments made within the last 90 days.
- Employees who change agencies (leave or the Postal Service hires or rehires) must inform their new agency or service that they have a TSP loan and instruct it to continue TSP loan payments. Until the new agency or service begins deducting loan payments from their pay, employees must submit loan payments directly to the TSP. Employees who transfer to an agency that has a different pay cycle from the previous agency must reamortize their loan to update the pay cycle and avoid missing loan payments.
- Members of the Ready Reserves whose drilling intervals are irregular (i.e., other than monthly) and civilians with intermittent pay schedules must consult the Postal Service before taking a loan from their TSP accounts so that they do not miss loan payments that could result in tax consequences.
Employees may reamortize their loan at any time to change the payment amount or to shorten or lengthen the repayment term, as long as the term does not exceed the prescribed maximum terms. An employee has an unlimited number of reamortizations during the life of a loan. Employees may reamortize their loan at www.tsp.gov or by calling the TSP.
Employees cannot suspend or stop their loan payments. Employees experiencing financial difficulties may be able to reamortize their loans to reduce the amount of each payment.
At the end of each calendar quarter, the TSP identifies accounts with missing loan payments. Employees who have missed a loan payment will receive a notice from TSP indicating that they have until the end of the following calendar quarter to pay the missing amount. Failure to pay by the date on the notice may result in serious tax consequences.
Employees may make additional loan payments by personal check or money order to restore their accounts more quickly or to make up for missed payments. Employees must do the following when paying by personal check or money order:
- Make checks and money orders payable to the Thrift Savings Plan and complete a TSP-26, Loan Payment Coupon. Employees can download TSP-26 from the TSP website.
- Provide their complete TSP account number and loan number on the check or money order and the TSP-26. If any information is missing, the TSP will return the payment.
- Send the payment with the completed TSP-26 to the TSP.
After several days, the employee will receive a notice confirming the payment.
Employees may prepay their loans in full at any time without a prepayment penalty, following the payment procedures specified in 596.43. Through the ThriftLine or www.tsp.gov, employees can obtain information on their prepayment amount, including totals for all unpaid principal and any unpaid interest. The TSP will notify the employee and Eagan ASC when the employee has paid the loan in full. If payments continue, the employee must contact Eagan ASC immediately.
