TSP loan and furlough length


Q. I want to take a loan from my Thrift Savings Plan account to cover my bills during the shutdown.  According to the TSP loan booklet, as long as the furlough last less than 30 days, this is not a problem. If the furlough lasts more than 30 days, the loan becomes a disbursement and is taxed, plus additional penalties assessed (10 percent) by the Internal Revenue Service. Is this true? How can one prepare for a furlough that lasts longer than 30 days?

A. I don’t know where you read this, but it’s not true. If you’re in nonpay status, you are ineligible to initiate a TSP loan, so the question is not applicable. If you have a loan and go into approved nonpay status, you may suspend loan payments for up to one year. After that, your loan will be reamortized and you will have to make loan payments by check to avoid default. See pages 13-15 of the TSP loan booklet at https://www.tsp.gov/PDF/formspubs/tspbk04.pdf for the facts.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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