Q. I work for the BOP and I am 10 months away from being forced to retire with 20 years of service. A few years ago there was talk around work that the age restriction was going to be raised, and it seems that was wishful thinking. I just accepted it as a probability because it was raised in the past and that gave me the opportunity to get hired. I took out a loan against my TSP account anticipating the age requirement would go up and as a result, unless something does change, I will most likely have a balance on this loan when I’m forced out. If I’m unable to pay this balance off prior to being forced out, what consequence can I expect as a result?
A. The unpaid balance will be declared a taxable distribution. The early withdrawal penalty may also apply if you don’t meet one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
