There are two types of Thrift Savings Plan loans:
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.
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, 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 or repairs, 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 outstanding at any one time.
Minimum loan amount. The smallest amount you can borrow is $1,000 of your own contributions and earnings.
Maximum loan amount. The maximum loan amount you can borrow is the smallest of the following:
(1) Your own contributions and earnings on those contributions in the Thrift Savings Plan account from which you intend to borrow (civilian or uniformed services), not including any outstanding loan balance (the Contributions and Earnings Test);
(2) 50% of your total vested account balance (including any outstanding loan balance) or $10,000, whichever is greater, minus any out-standing loan balance (the Internal Revenue Service (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). Even if the loan is currently paid in full, it will still be considered in the calculation if it was open at any time during the last 12 months. For example, if you took out a loan for $35,000, then paid the loan back in full within 12 months, the maximum loan amount you would be eligible to borrow would remain $15,000 ($50,000 minus $35,000, the highest outstanding balance during the last 12 months) even though the money has been returned to your account. Note: The above example is based on the assumption that the IRS $50,000 Test is the lower of the three maximum loan amount tests.
Your account balance is recalculated at the end of each business day based on that day’s closing share prices and any transactions processed for your account that night. Therefore, your maximum loan amount may also change each day. To see the maximum loan amount you are eligible to borrow, log into My Account on the TSP website (http://www.tsp.gov), and click on “TSP Loans”.
When you borrow from your TSP account, the loan is disbursed proportionally from any traditional (non-Roth) and Roth balances in your account. Similarly, if you are a uniformed services employee with tax-exempt contributions in your traditional balance, your loan will contain a proportional amount of tax-exempt contributions as well. If your TSP account is invested in more than one fund, your loan is deducted proportionally from the employee contributions (and earnings on those contributions) that you have in each fund. Your total account balance is decreased by the amount of your loan.
When you repay your loan, your payments (including interest) are deposited back into the traditional (non-Roth) and Roth balances of your account in the same proportion used for your loan disbursement. The re-payment amount is invested in your TSP account according to your most recent contribution allocation.
The loan interest rate you pay for the life of the loan will be the G Fund’s interest rate that is in effect on the date that your Loan Agreement is generated.
You must be in pay status to get a TSP loan because loan payments are submitted through payroll deductions. Therefore, if you are not currently receiving pay (i.e., you are in nonpay status), you will not be eligible for a TSP loan.
• 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 you have been approved by your command for non-attendance of scheduled drill dates or you have been approved by your command to perform your yearly drill schedule over a one- or two-month period, 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.
Note: If your unit does not drill in a given month, you are not considered to be in nonpay status.
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 services, 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 website, if you request a loan online).
• 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 Form TSP-16, Exception to Spousal Requirements (TSP-U-16 for members of the uniformed services), which is available from the TSP website, or from your agency or service.
The TSP will pursue, and refer to the Department of Justice for prosecution, any person who attempts to deprive a spouse of his or her TSP rights by forging the spouse’s signature, by lying about marital status, or by taking similar fraudulent actions.
If you have a court order against your account, you will not be able to get a loan. The TSP must honor certain orders, such as those that enforce payment of child support or alimony, or that award a portion of your account to a former spouse. When the TSP receives a court order, a hold is placed on your account. You cannot get a loan until the court order has been satisfied. For more information about court orders, read the TSP booklet Court Orders and Powers of Attorney, available from the TSP website (http://www.tsp.gov), your agency or service, or the TSP.
Source: TSPBK04 (5/2012)