One change that takes effect immediately will allow those employees covered by the Federal Employees Retirement System (FERS) to credit their unused sick leave in the calculation of their FERS annuity.

Until the passage of this law, only those employees covered by the Civil Service Retirement Systems (CSRS) and CSRS-Offset could receive credit for their unused sick leave hours in the computation of their CSRS annuities. But FERS employees who retired would forfeit all of their unused sick leave.

This column discusses how unused sick leave will be added to the service time of those FERS-covered employees who will be retiring starting October 28, 2009.

Readers should note that the information presented in this column is based on the unused sick leave regulations that currently apply to CSRS and CSRS-Offset employees. Until the Office of Personnel Management (OPM) issues final regulations for FERS employees, the information presented in this column is preliminary and tentative. But there is little reason to believe that OPM will have a different set of regulations regarding the treatment of unused sick leave for retiring FERS employees and for retiring CSRS employees.

From Oct. 28, 2009 and through Dec. 31, 2013, retiring FERS-covered employees will add 50 percent their unused sick leave at the time of retirement to their service time for the purpose of calculating their FERS annuity. FERS employees retiring on or after Jan. 1, 2014 will add all of their unused sick leave at the time of retirement in the calculation of their FERS annuity. Besides the 50 percent limitation that applies between now and Dec. 31, 2013, there is no limit as to how much sick leave will be used in the annuity calculation. Note that unused sick leave (as well as unused annual leave) credit cannot be used to calculate the retiring employee’s high-three average salary.

Sick leave is earned in hours. A full time employee normally accrues four hours of sick leave each pay period. A FERS annuity is calculated based on years and months of total service. It is useful and important to review the rules regarding how the Office of Personnel Management (OPM) converts sick leave (earned in hours) to months and days of service.

All employees should note that unused sick leave credit is used only in the computation of the retirement annuity benefit. Unused sick leave cannot be used to establish retirement eligibility as the following example illustrates.

Joan, age 60, has 19 years and 4 months of service. Joan would like to retire Jan. 30, 2010 when she will have 19 years and 7 months of federal service and 6 months of unused sick leave. Since Joan will not have 20 years of federal service as of Jan. 30, 2010, she will have to wait until at least April 30, 2010 to retire. At that time, Joan will have 20 years and 0 months of service and 6 months of unused sick leave. Since Joan is retiring before Dec. 31, 2013, she will receive credit for 50 percent of her unused sick leave, or 3 months. Joan’s FERS annuity will then be calculated based on 20 years and 3 months of service.

OPM uses the following procedure to convert unused sick leave in hours into months and days. According to OPM, there are 30 days in a month and 12 months in a year, or 360 days per year. Full time employees work 2,087 hours per year. 2,087 hours divided by 360 days per year equals a conversion factor of 5.797 hours of unused sick leave equates to one day of service.

OPM has a sick leave conversion chart that will convert unused sick leave hours into months and days of service.

For example, from the sick leave chart 765 hours of unused sick leave equates to 4 months and 12 days of service.

The sick leave conversion chart does not list every number between 0 and 2,087 — there are gaps. An employee has to use the next number “up” if a figure on the chart does not correspond exactly to the total hours of unused sick leave credited to the employee at the time of retirement.

Here is an example:

An employee has 1,400 hours of unused sick leave at retirement. “1,400 hours” does not appear on the chart but. “1,397 hours and “1,403 hours” do appear. The employee would use “1,403 hours” to determine the amount of service to be added in the computation of the annuity. The 1,403 hours of unused sick leave equates to 8 months and 2 days of service.

The following worksheet should be used by retiring FERS employees – effective immediately – and through Dec. 31, 2013.

If a FERS-covered employee retires at any time after Dec. 31, 2013, the full amount of unused sick leave will be added to the total service time.

The following examples illustrate:

Example 1 Ann, age 60, retired Oct. 31, 2009 with 25 years, 6 months and 13 days of total FERS service. Her unused sick leave balance at the time of retirement is 1,202 hours.

The FERS annuity will be calculated on years and months of service. Any amount less than a month — such as the 27 days in the previous example — will not be counted in the FERS annuity calculation.

Example 2 Same as Example 1, except that Ann retires on Oct. 31, 2014 with 1,672 hours of unused sick leave.

*32 days equals 1 month and 2 days.
** 16 months equals 1 year and 4 months

The FERS annuity will be calculated based on 31 years and 4 months of service.

Finally, there is the question of unused sick leave for those employees who transferred to FERS from CSRS and who will be receiving both a CSRS and a FERS annuity, based on years of service in both retirement systems. Under the old law, “Trans” FERS employees received credit only towards the CSRS component of their retirement benefit for the lesser number of unused sick leave hours either:

• 1. on the day of transfer to FERS or;
• 2. on the day of retirement. Although OPM has not given guidance for these appears, it would appear that under the new law any sick leave not used for the CSRS annuity component would be creditable for the FERS annuity component.

OPM should in the near future issue official guidance rules for the treatment of unused sick leave for all FERS employees.

Before retirement, a federal employee may elect a reduced annuity (CSRS or FERS, or both annuities in the case of a “trans” FERS employee) in order to provide an insurable interest benefit to a current or former spouse or to another person who depends on the employee for support.

Spousal survivor annuity benefits (CSRS and FERS). This column discusses survivor annuity benefits for someone other than a current spouse. The column will also discuss what happens in the event no survivor annuity is payable.

The discussion focuses on providing a survivor annuity benefit for an “insurable interest.” For purposes of a survivor annuity benefit, everyone is considered to have an insurable interest in their own lives as well as the lives of their spouses and dependents. For survivor annuity benefit election purposes, an insurable interest is presumed to exist if a retiring employee names any of the following individuals as an insurable interest beneficiary:

• 1. a spouse;
• 2. a blood or adopted relative closer than first cousins. This includes children, siblings and a parent;
• 3. a former spouse;
• 4. a person to whom the employee is engaged to be married; or
• 5. a person with whom the employee is living in a relationship that would constitute a common-law marriage in a jurisdiction that recognizes common-law marriages.

But there are important differences between naming a spouse (or a former spouse in cases of a court order) as the beneficiary of an insurable interest survivor annuity versus one of the other named eligible individuals. If an employee is married, or was married and had a court order demanding survivor annuity benefits for a former spouse, then the former spouse must formally consent to a survivor annuity being giving to someone else.

An employee who names an insurable interest other than a spouse must be in good health and retire for reasons other than disability. The employee is responsible for arranging and paying the cost of any medical examination. A report of the examination must be included with the retiring employee’s application for retirement.

If the retiring employee names an individual as a survivor annuitant who is not included in the above list, then the retiring employee must also submit affidavits with his or her retirement application from one or more individuals with knowledge of the employee’s insurable interest in that individual. The retirement application forms are Standard Form (SF) 2801 for CSRS-covered employees and SF 3107 for FERS-covered employees. The affidavit should state the relationship between the employee and the insurable interest, the extent to which the person named is dependent on the employee and the reason why the person named as a survivor annuitant might reasonably expect to derive financial benefit from the retiring employee’s continued life.

In order to provide an insurable survivor annuity benefit, the annuitant’s CSRS or FERS annuity will be reduced. The amount of the reduction will depend on the age difference between the annuitant and the insurable interest. This is different from a spousal survivor annuity because when it comes to a spousal survivor annuity, the cost to the annuitant (in the form of a monthly reduction in his or her gross annuity) is not affected by any difference in the spouses’ ages.

At the annuitant’s death, an insurable interest survivor annuitant will receive 55 percent of the reduced benefit (CSRS or FERS). This is different from a spousal survivor annuity in that a surviving spouse receives a maximum 55 percent (CSRS) or 50 percent (FERS) of the unreduced benefit. The following table summarizes.

The following examples illustrate the cost and benefit of an insurable interest survivor annuity:

Example 1.

Jan, age 57, is a FERS-covered employee who will be retiring in July 2009. Jan is a single individual who is supporting her mother, age 89. Jan decides to give her mother an insurable interest survivor annuity. Jan’s gross FERS annuity will be $40,000. In order to give the insurable interest survivor annuity, Jan’s gross annuity will be reduced 10 percent of $40,000 or $4,000. Jan’s FERS annuity will therefore be reduced by $4,000 to $36,000. Should Jan pass away, Jan’s mother would receive a survivor annuity equal to 55 percent of $36,000, or $19,800.

Once Jan receives cost-of-living adjustments or COLAs, the insurable interest survivor annuity will also receive the same COLAs.

Example 2.

Tom, age 58, was a CSRS-covered employee who retired Feb. 1, 2009. Tom was approved for giving an insurable interest survivor annuity to his partner, age 33. Tom’s gross annuity before the reduction for the insurable interest survivor annuity was $75,000. Tom’s gross annuity will have to be reduced by 35 percent in order to give his partner, who is 25 years younger, a survivor annuity benefit. This means 35 percent of $75,000 or $26,250. Tom’s CSRS annuity will then be $75,000 minus $26,250 or $48,750. At his death, Tom’s partner will receive a survivor annuity of 55 percent of $48,750 or $26,812.50. Both the CSRS survivor annuity and the CSRS annuity are increased annually by COLAs.

The insurable interest survivor annuity automatically ends if the insurable interest dies, if the annuitant marries the insurable interest and elects to provide a spousal benefit, or if the named person is the annuitant’s spouse and the annuitant changes the election to provide a spousal survivor benefit.

If an employee or annuitant dies leaving no survivors who qualify for a survivor benefit, then the employee’s contribution to the CSRS or FERS retirement fund will be paid as a lump-sum according to the employee’s or annuitant’s beneficiary designation. Forms SF2808 (CSRS) or SF 3102 (FERS) need to be filled out, signed and dated in order to make these beneficiary designations. The forms should be submitted to an employee’s Personnel or Human Resources Office prior to the employee’s retirement. Both forms may be downloaded from www.opm.gov.

If a valid beneficiary has not been designated, then OPM will make payment according to the following order of precedence:

• 1. Widow or widower
• 2. Children
• 3. Parents in equal shares or the entire amount to the surviving parent
• 4. Determined by the Executor of the deceased through the deceased’s Will.
• 5. The next of kin determined by OPM to be entitled under the laws of the domicile of the deceased on the date of death.

Generally, all federal and postal employees hired after January 1, 1984 (or CSRS-covered employees that opted for FERS coverage in one of the open seasons in 1987 or 1998)

Benefits

Annuity offering guaranteed lifetime retirement income with a survivor benefit annuity option
Regular employees:
0.8% to FERS Retirement & Disability Trust Fund
1.45% to Medicare
6.2% of first $106,800 of wages (in 2010) to Social Security

Employee contributions

Special employee groups:
(law enforcement, firefighters, air traffic controllers)
1.30% to FERS Retirement & Disablity Trust Fund
1.45% to Medicare
6.2% of first $106,800 of wages (in 2010) to Social Security

Thrift Savings Plan

FERS employees can contribute up to $16,500 (in 2011) of basic pay per year. The government automatically contributes 1% of employee’s basic pay to the TSP; up to 5% of basic pay depending on the amount of the employee’s contribution.

FERS Retirement Eligibility: Regular Employees

Types of FERS Retirements – Regular Employees

FERS MRA (Minimum Retirement Age)

The FERS MRA (Minimum Retirement Age) is the earliest age in which you can retire without an age reduction penalty if your have at least 30 years of service.

The MRA is determined by your year of birth as follows:

Calculating your FERS Retirement Annuity

Things you will need:

• Government employment start date and annual earning history
• Determine the total length of your service to Uncle Sam by adding together your creditable civilian and military service and any unused sick leave credit. This can include up to six months of leave without pay and also Workers’ Compensation.
• Calculate your high-three average salary by using the 30 day month factor table (your supervisor or HR department can give this to you). Go through your earnings history to determine the three year period in which you earned the most. In most cases, this will be the last three years of your career.
• Use these numbers to calculate your actual annuity. The basic FERS formula gives you one percent of your high-three average salary for all your years of creditable service under FERS. If you have at least 20 years of service and age 62 or older, then your annuity is computed using a 1.1 percent accrual factor multiplied by the high-three average salary and the years of creditable service.
• Check with your agency payroll office for rules regarding payment for other types of leave (e.g., compensatory leave, credit hours). You can also find out from your agency payroll office what deductions will be taken from this lump sum payment (i.e., Federal, State, City taxes, Medicare taxes, etc.).
• Check to see if you are eligible for the Special Retirement Supplement. A special retirement supplement is available under the FERS system until age 62. This benefit is subject to the same earnings test that is applied to Social Security for recipients, age 62 — 65.

]]> http://www.gebagency.com/wp/2011/12/21/fers-retirement-overview/feed/ 0 http://www.gebagency.com/wp/2011/12/21/common-tsp-forms/ http://www.gebagency.com/wp/2011/12/21/common-tsp-forms/#comments Wed, 21 Dec 2011 20:24:47 +0000 gebadmin http://www.gebagency.com/wp/?p=243 TSP Form Library: Download TSP Forms

The new Thrift Savings Plan (TSP) website has an easier way to access the TSP form library.

To access a specific TSP form click here.

Some of the most requested TSP forms include:

TSP Form: TSP-70, Request for Full Withdrawal
Use this form to request an immediate withdrawal of your entire vested account balance, to be paid after your agency confirms your separation from Federal service.

TSP Form: TSP-20, Loan Application
Use this form to apply for a loan. You must have at least $1,000 of your own contributions and earnings in your account to obtain a TSP loan.

TSP Form: TSP-3, Designation of Beneficiary
Use this form to designate a beneficiary or beneficiaries to receive your Thrift Savings Plan (TSP) account after your death.

TSP Form: TSP-1, Election Form
Use this form to start, stop, or change the amount of your contributions to the Thrift Savings Plan (TSP).

TSP Form: TSP-76, Financial Hardship In-Service Withdrawal Request
You can complete this worksheet to help you determine if you have a negative cash flow and the amount of the negative cash flow. Use the instructions at the bottom of this page to help you complete the items. If you are married, you must include financial information for yourself and your spouse. Do not submit this worksheet with your request.

To search for TSP forms by form number or by form topic, go to:

https://www.tsp.gov/forms/civilianForms.shtml

Therefore, TSP participants who are still employed by the federal government, including those employees in nonpay status, are limited to the following two types of in-service withdrawals:

• Age-based in-service withdrawals for participants who are 59½ or older.
• Financial hardship in-service withdrawals for participants who can certify that they have a financial hardship.

When you make an in-service withdrawal, you cannot return or repay the money you remove from your account, so you permanently deplete your retirement savings and future earnings on the amount withdrawn. If you are in pay status, before making an in-service withdrawal, you should evaluate your options to see if a TSP loan would be more beneficial. (See Thrift Savings Plan Loan Program) If you have an outstanding TSP loan, making an in-service withdrawal will not eliminate the requirement to make loan payments.

Age-based withdrawals

While you are employed by the federal government, you can make a one-time-only withdrawal of all or any portion of your vested account balance if you are 59½ or older. Your request must be for at least $1,000 or for your entire vested account balance (even, if your balance is less than $1,000).

If you make an age-based withdrawal from your account, you will not be eligible for a partial withdrawal from that account after you separate from service.

Financial hardship withdrawals

While you are employed by the federal government, you may be able to withdraw your own contributions and earnings for a financial hardship. The amount of the financial hardship withdrawal is limited to your financial need. You cannot withdraw less than $1,000.

To be eligible for a financial hardship withdrawal, your financial need must result from at least one of the following four conditions: negative monthly cash flow, medical expenses (including household improvements needed for medical care), personal casualty losses, or legal expenses for separation or divorce.

To help you determine whether you have a negative monthly cash flow and the amount of the negative monthly cash flow, you can complete the worksheet that is provided with the Financial Hardship Withdrawal Request (Form TSP-76). To complete the worksheet, you will have to use financial information for yourself and, if you are married, your spouse. You will have to determine your monthly income (i.e., from employment, child support, and alimony) and expenses (i.e., housing, utilities, dependent care, alimony and child support, and installment loan payments for loans other than TSP loans). The worksheet also provides factors to determine an allowance for ordinary household expenses based on income and family size. The allowance takes into account items such as food, clothing, health insurance premiums, entertainment, and other miscellaneous expenses. (Credit card payments are included in this allowance so they cannot be used in determining expenses.) You do not have to return the worksheet with your request for a financial hardship withdrawal.

Although you will not have to provide either income information or documentation to substantiate the financial hardship, you should retain this information and documentation for future reference because you will have to certify on the Form TSP-76, under penalty of perjury, that you have a genuine financial hardship and what the reason for the financial hardship is.

After making a financial hardship withdrawal, you cannot contribute to your TSP account for 6 months. If you are a FERS participant, you will not receive any agency natching contributions for the period which you are not making employee contributions; however, you will continue to receive agency automatic (1%) contributions. At the end of the 6-month period, your contributions will not resume automatically. You must make a contribution election on Form TSP-1 (or your agency’s electronic version) and file it with your agency if you want to resume contributions. Your contributions will then be allocated according to your most recent contribution allocation. You are eligible to request another financial hardship withdrawal 6 months after your previous one.

The cost of making a financial hardship in-service withdrawal

The cost of making a financial hardship in-service withdrawal is significant. For example, you permanently deplete your retirement savings by the amount of your withdrawal plus any earnings you could have received on that amount — thus reducing your future retirement income. In addition, your withdrawal is subject to federal income tax and, if you are less than age 59 ½ when you make your withdrawal, most likely an early withdrawal penalty tax. These costs are in addition to the cost of not being able to contribute to your TSP account for 6 months after your financial hardship in-service withdrawal is made. If you are a FERS employee, this means that you will also not receive any matching contributions for that 6-month period during which you are not making employee contributions. These are contributions that can never be recaptured for your future retirement needs.

You should consider these costs before making a financial hardship in-service withdrawal, and, if you are in pay status and are eligible for a TSP loan, you may want to consider taking a loan instead.

Do spouses’ rights affect in-service withdrawals?

Yes. If you are a married FERS participant, your spouse must consent to your in-service withdrawal. If you are a married CSRS participant, the TSP must notify your spouse before the in-service withdrawal can be made. (See” Spouses’ Rights.”) These rights apply even if you are legally separated from your spouse.

How to request an in-service withdrawal

Before you apply for an in-service withdrawal, read the booklet TSP In-Service Withdrawals. Use the account access section of the TSP website (http://www.tsp.gov) or complete Form TSP-75, Age-Based In-Service Withdrawal Request, or Form TSP-76, Financial Hardship In-Service Withdrawal Request (depending on the type of withdrawal you are requesting). Both forms are available from the TSP website.

If you have a pending application for another in-service withdrawal, or for a TSP loan at the time your request is received, your request will not be accepted. Only one request for an in-service withdrawal or a loan is permitted at a time.

If you want to transfer all or any portion of an age-based in-service withdrawal to a traditional IRA or eligible employer plan, have your IRA or plan complete the appropriate section of Form TSP-75. Financial hardship in-service withdrawals are not eligible to be transferred.

Taxation of an in-service withdrawal

Age-based in-service withdrawal payments are considered “eligible rollover distributions” for federal income tax purposes and, as such, are subject to mandatory 20 percent Federal income tax withholding. However, you can avoid withholding on all or any portion of an age-based in-service withdrawal payment by transferring the payment directly to a traditional IRA or eligible employer plan.

A financial hardship in-service withdrawal is considered a non-periodic payment for federal income tax purposes. The TSP will withhold ten percent for federal income tax from such a payment unless you submit IRS Form W-4P, Withholding Certificate for Pension or Annuity Payments (available at the IRS website http://www.irs.gov), requesting a different amount of withholding or a waiver of withholding. (Form W-4P must be submitted to the TSP with your in-service withdrawal request.) In addition, if you make a financial hardship in-service withdrawal before age 59½, you may be subject to a 10 percent early withdrawal penalty tax. This penalty tax is in addition to the ordinary income tax you will have to pay. Financial hardship in-service withdrawals are not eligible to be transferred.

Basic rules for contributing to your Thrift Savings Plan account. (Please note any difference between CSRS and FERS employees.)

If you are a FERS employee:

• You can elect to contribute to the Thrfit Savings Plan at any time; there is no waiting period. The amount you can contribute changes annually. You may elect to contribute any dollar amount or percentage (1 to 100) of your basic pay. However, your annual dollar total cannot exceed the Internal Revenue Code limit, which is $15,500 for 2008.
• Your agency will start to contribute Agency Automatic (1%) Contributions to your account after you have completed the mandatory waiting period. See the chart below to determine when you will be eligible.
• If you are contributing your own money, you will also receive Agency Matching Contributions after you have completed the mandatory waiting period.

If you are a CSRS employee:

• You can elect to contribute to the TSP at any time; there is no waiting period. The amount you can contribute changes annually. You may elect to contribute any dollar amount or percentage of basic pay. However, your annual dollar total cannot exceed the Internal Revenue Code limit which is $15,500 for 2007.
• You do not receive any Agency Automatic (1%) or Matching Contributions.

All FERS and CSRS employees:
You can start, change, stop, or resume TSP contributions at any time.

Your payroll contributions will begin the first full pay period after your agency accepts your TSP Election Form (TSP-1) (or an electronic version of TSP-1, if your agency uses one).
You can contribute either a percentage of your basic pay each pay period or a fixed dollar amount. If you make your contributions as a percentage of your pay, the amount of your contributions will automatically increase as you receive pay raises.

You can change the allocation of your TSP contributions among the different investment funds at any time using this Web site, the Thrift Line, or Form TSP-50, Investment Allocation. If you prefer to change your allocation using Form TSP-50, contact your personnel office.) You can change the way money already in your account is invested by making an interfund transfer using the same methods. If you are age 50 or older, you can make catch-up contributions to your account.

Contributions must be made through payroll deductions. However, you may also transfer or roll over eligible funds from a traditional IRA or an eligible employer plan into your TSP account. See Form TSP-60, Request for a Transfer Into the TSP.

You must be in pay status (that is, receiving basic pay) to make contributions and to receive agency contributions for a pay period. Therefore, if you are not in pay status, your contributions (and your agency contributions, if you are a FERS employee) will stop until you begin receiving pay once again.

Basic pay for TSP purposes is defined by law. It consists of the same elements of pay used to calculate the deduction for your FERS or CSRS annuity. The definition does not include awards, bonuses, buyout incentives, or many forms of premium pay. Contact your personnel office if you have questions about your basic pay for TSP purposes.

Note: As a result of Public Law 103-353, the Uniformed Services Employment and Reemployment Rights Act (USERRA), federal civilian employees may make up contributions missed due to military service. However, certain restrictions apply if you are contributing to the TSP while performing military service.

When can I sign up to contribute?
You can sign up to contribute to the TSP at any time. Your contributions will begin no later than the first full pay period after your agency accepts your election. If you are a FERS employee, your agency contributions will begin once you satisfy the mandatory waiting period.

What if I am a rehired employee?
If you are a rehired FERS or CSRS employee who had a break in service of 31 or more full calendar days, you can sign up to contribute to the TSP immediately upon reemployment. If you are a rehired FERS employee, your Agency Automatic (1%) and Matching Contributions (if you are contributing your own money) will begin as follows:

• If you were previously eligible to receive agency contributions, your agency contributions will begin immediately.
• If you were not previously eligible to receive agency contributions, your agency contributions will begin according to the chart above.

If you are a rehired employee who had a break in service of less than 31 full calendar days and you were previously contributing to the TSP, your contributions and, if you are FERS, your agency contributions will resume upon rehire. To ensure that your contributions resume properly, you should tell your new agency that you were previously contributing to the TSP. If you were not previously contributing to the TSP, you may elect to contribute at any time. You can also change the amount of your contributions at any time.

You should also inform your new agency if you have any outstanding TSP loans so your loan payments can resume. You must make up, from your own funds, any loan payments you have missed.

If you are rehired as a CSRS employee and you choose to change your retirement coverage to FERS, your Agency Automatic (1%) Contributions will begin the same pay period the transfer to FERS becomes effective. You may elect to contribute your own money at any time. If you do, your contributions and your Agency Matching Contributions will begin no later than the pay period that begins after your agency receives your election.

How do I start my contributions to my TSP account?

To start contributing to the TSP, ask your personnel office for the TSP Election Form (TSP-1), download the form the TSP website www.tsp.gov, or use your agency’s electronic version if one is available. Complete the form to show whether you want to contribute a percentage of your basic pay or a fixed whole dollar amount each pay period.

Your agency will deduct the amount you choose from your pay each pay period and will continue to do so until you submit another election to stop or change the amount.

What if I transfer to another agency?

If you transfer to another agency, your new agency should continue your contributions and loan payments, if any, without interruption. To avoid any delay, you should notify your new personnel office that you have been contributing to the TSP; you should also notify them if you have a loan.

How do I change the amount of my contributions?

If you want to change the amount of your TSP employee contributions, submit Form TSP-1 to your agency (or use your agency’s electronic version, if your agency has one.)

How do I stop my contributions?

You can stop contributing your own money to the TSP at any time by completing the appropriate sections on Form TSP-1 and submitting it to your agency. Your contributions will stop at the end of the pay period in which your agency accepts the form. You may resume contributions at any time.

If you are a FERS employee, your Agency Automatic (1%) Contributions will continue, and will be invested according to your last contribution allocation on file with the TSP. Agency Matching Contributions will end when your contributions end. Even if you are not contributing, you can change the way your future Agency Automatic (1%) Contributions are invested by making a contribution allocation on this Web site, the Thrift Line, or Form TSP-50 at any time.

What is a contribution allocation?

A contribution allocation specifies the way contributions to your account will be invested among the TSP funds. The contribution allocation applies to all future contributions, as well as loan payments and transfers (or rollovers) of funds from other plans into the TSP. It does not affect the money already in your account. (To change the way your existing account balance is invested, you must make an interfund transfer.)

Before you decide how to allocate your contributions, read “Your Investment Options”.

How do I make a contribution allocation?

To specify the way you want your contributions to be invested, use this Web site or the Thrift Line, or submit Form TSP-50, Investment Allocation, to the TSP. (Do not submit Form TSP-50 to your agency.) If you have not previously invested in the F, C, S, I, or L Funds, you must acknowledge the risk of investing in these funds before you can proceed with your contribution allocation. To request a contribution allocation, follow the instructions and enter the percentages you want invested in each fund each pay period. Percentages must be stated in one percent increments and must add up to 100 percent. Whether you are using the Web site or the Thrift Line, be sure to follow the instructions to confirm the percentages or your allocation will not be effective.

The Web site and the Thrift Line are the most efficient ways of making a contribution allocation. Contribution allocations generally will become effective within 2 business days of the date the TSP receives your request.

What if I do not make a contribution allocation?

All contributions, including your agency contributions if you are FERS, will be invested in the G Fund until you make a contribution allocation on the TSP website www.tsp.gov or the Thrift Line or submit Form TSP-50 to the TSP.

• General purpose loan with a repayment period of 1 to 5 years. No documentation is required.
• Residential loan with a repayment period of 1 to 15 years. Documentation is required.

Residential Loan

A residential loan can be used only for the purchase or construction of a primary residence. The residence can be a house, condominium, shares in a cooperative housing corporation, or a townhouse, boat, mobile home, or recreational vehicle, but it must be used as your primary residence. The residence must be purchased (in whole or in part) by you. You can obtain a residential loan for constructing a new residence or purchasing an existing residence, but not for refinancing or prepaying an existing mortgage, for renovations, for buying out another person’s share in your current residence, or for the purchase of land only.

You may have only one general purpose loan and one residential loan at any one time.

Minimum loan amount. The smallest amount you can borrow is $1,000.

Maximum loan amount. TSP and Internal Revenue Service (IRS) rules limit the amount you can borrow. The principal amount cannot exceed the smallest of the following:

• 1. Your contributions and their earnings in your civilian or uniformed
  services account (that is, the account from which you are taking the loan), not including any outstanding loan balance (the Contributions and Earnings Test);
• 2. 50 percent of your total vested account balance (including any outstanding loan balance) or $10,000, whichever is greater, minus
  any outstanding loan balance (the IRS Vested Balance Test); or
• 3. $50,000 minus your highest outstanding loan balance, if any, during the last 12 months (the IRS $50,000 Test).

If you have a civilian and a uniformed services account, the combined account balances and loan balances will be used to calculate Items 2 and 3.

Your account balance is recalculated at the end of each business day based on the daily share prices. Therefore, your maximum loan amount may also change each day.

When you borrow from your TSP account, your account balance is decreased by the amount of your loan. If your loan account is invested in more than one fund, your loan is deducted on a proportional basis from the employee contributions (and earnings on those contributions) that you have in each fund.

When you repay your loan, your payments are invested in your TSP account according to your most recent contribution allocation.

The loan interest rate you pay for the life of the loan is the G Fund rate at the time your application is processed.

You must be in pay status to get a TSP loan because you must repay your loan with payroll deductions. Therefore, if you are not currently receiving pay, you will not be eligible for a TSP loan. The TSP refers to this status as “nonpay.”

• For civilian TSP participants, nonpay status includes leave without
  pay and furlough.
• Most uniformed services members will never be in nonpay status.
  However, if you are a member of the Ready Reserve and your drilling intervals are irregular (that is, other than monthly) and therefore you do not receive pay each month, you are considered, for TSP purposes, to be in nonpay status during the months you do not drill. When you return to pay status, you may apply for a TSP loan.

By law, your spouse has certain rights to your TSP account.
Therefore, when you request a loan, you must indicate whether you are married, even if you are separated from your spouse.

If you are married, the following rules apply:

• If you are a FERS participant or a member of the uniformed serv-ices, your spouse must consent to your TSP loan by signing the Loan Agreement that the TSP will send you (or that you print from the TSP Web site, if you request a loan on line).
• If you are a CSRS participant, the TSP must notify your spouse when you apply for a loan. Exceptions may be approved under certain very limited circumstances. For more information, refer to the Exception to Spousal Requirements form, which is available from the TSP Web site www.tsp.gov , or from your agency or service.

The Thrift Savings Plan loan program is an important benefit that allows participants access to the money in their accounts. However, taking a loan could result in less money for you at retirement. So, before you borrow from your account, consider the following:

• 1. If your TSP investments earn higher rates of return than the interest rate on the loan, the loan interest you pay will not be equal to the earnings you would have received if the money had remained in your account. This means that your TSP account will be smaller than it would have been if you had not borrowed from it.
• 2. If you are not able to contribute as much to the TSP because of the financial burden of your loan payments, your TSP account will not grow as quickly. If you are a FERS employee and you have to reduce your contribution rate to below 5%, you will also give up agency matching contributions.
• 3. A TSP residential loan is not a mortgage. Therefore, the TSP loan interest payments are not tax deductible, as they might be for a mortgage or home equity loan.
  Before you take a TSP loan, make sure you realize its potential effect on your retirement income and decide whether it makes more sense to borrow from another source.

Before you take a TSP loan, make sure you realize its potential effect on your retirement income and decide whether it makes more sense to borrow from another source.

• G Fund (Government Securities Investment)
• F Fund (Fixed Income Index Investment)
• C Fund (Common Stock Index Investment)
• S Fund (Small Capitalization Stock Index Investment)
• I Fund (International Stock Index Investment
• L Funds (Lifecycle)

You can allocate any whole percentage of your future contributions (including loan payments and transfers from traditional IRAs or eligible employer plans) to any of the TSP investment funds by making a contribution allocation.
You can redistribute your existing account balance among the funds by making an interfund transfer.

The purpose of the TSP is to provide supplemental retirement income.

The TSP offers federal employees the same type of savings and tax benefits that many private corporations offer their employees under “401(k)” plans.
In the civilian component of the TSP, employees covered by the Federal Employees’ Retirement System (FERS) and the Civil Service Retirement System (CSRS) can contribute to the TSP. The participation rules are different for FERS and CSRS employees.