FORT GEORGE G. MEADE, Md. (AFNS) – As the closure of government offices and activities continues, the Thrift Savings Plan, the retirement savings program for federal employees and members of the uniformed services, will carry on operations.
Since neither the TSP nor the Federal Retirement Thrift Investment Board depend on congressional appropriations, investment activities will continue as usual, according to a TSP news release. In addition, current investments and resulting gains are held in trust for the participants and neither congress nor the administration has access to the funds.
If military pay and allowances for uniformed members will continue, so will any scheduled contribution allotments to the TSP funds. Civilian employees, on the other hand, have options to consider when it comes to additional furlough days.
Because the shutdown is expected to last only a short time, government agencies should not send a Form TSP-41, Notification to TSP of Nonpay, the release stated.
While federal employees are not paid during a furlough, TSP contributions from pay deductions will also stop and any contributions to Federal Employees’ Retirement System accounts will likewise be halted.
For those needing to access their previous TSP contributions to supplement for missing income during the furlough, TSP hardship withdrawals, limited to the individual’s financial need, are possible. While such withdrawal may seem like a convenient way to fill a short-term gap in income, premature withdrawals will prevent members to contribute income for six months and may incur a 10 percent early withdrawal penalty. This type of withdrawal cannot be repaid and will permanently reduce TSP accounts.
Alternatively, participants may be eligible to apply for a TSP loan, which enables the borrower to repay their own TSP account and therefore still accrue earnings on their contributions once they are repaid – with interest on the loan. The loans generally require a repayment through payroll deductions, with the first payment due before the 60th day after the issue of the loan. Employees may therefore only take a loan against their TSP if a furlough (and time without pay) is expected to last less than 30 days; borrowers would still be responsible for payment if the a shutdown were to extend beyond 60 days.
Existing TSP loans, meanwhile, may be adjusted to allow for longer repayment periods.
For more information about the effects of a sustained furlough, please view the TSP factsheet Impact of a Government Shutdown on the TSP and options to manage your savings, visit http://www.tsp.gov.