[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Rules and Regulations]
[Pages 1600-1601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01060]

[[Page 1600]]



5 CFR Part 1655

TSP Loan Eligibility During Government Shutdowns

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Interim rule.


SUMMARY: This interim rule amends the Thrift Savings Plan (TSP) 
regulations to allow certain TSP participants to request a loan during 
government shutdowns without regard to whether they are in pay status.

DATES: This interim rule is effective February 5, 2019. Comments must 
be received by March 7, 2019.

FOR FURTHER INFORMATION CONTACT: For press inquiries, contact Kim 
Weaver at (202) 942-1641. For information about commenting on this 
interim rule, contact Laurissa Stokes at (202) 942-1645. For 
information about how to request a TSP loan, contact 1-TSP-YOU-FRST (1-

ADDRESSES: You may submit comments using one of the following methods:
     Federal Rulemaking Portal: http://www.regulations.gov.
    Follow the instructions for submitting comments.
     Mail: Office of General Counsel, Attn: Megan G. Grumbine, 
Federal Retirement Thrift Investment Board, 77 K Street NE, Suite 1000, 
Washington, DC 20002.
     Facsimile: Comments may be submitted by facsimile at (202) 
    The most helpful comments explain the reason for any recommended 
change and include data, information, and the authority that supports 
the recommended change.


Type of Rulemaking

    Generally, Federal regulations are first published in proposed form 
to allow the public to make comments before the rule becomes effective. 
An interim rule is a way to make a rule effective immediately, without 
public comment, when doing so is necessary to respond to an emergency 
situation. Interim rules are usually followed by a more permanent 
rulemaking which confirms that the interim rule will be adopted as 
final. Although this rule is effective immediately, the FRTIB will 
consider public comments before publishing the final rule.


    The FRTIB administers the Thrift Savings Plan (TSP), which was 
established by the Federal Employees' Retirement System Act of 1986 
(FERSA), Public Law 99-335, 100 Stat. 514. The TSP is a tax-deferred 
retirement savings plan for Federal civilian employees and members of 
the uniformed services. The TSP is similar to cash or deferred 
arrangements established for private-sector employees under section 
401(k) of the Internal Revenue Code (26 U.S.C. 401(k)).
    The Internal Revenue Code (i.e., the tax code) offers tax subsidies 
to people who save for their own retirement. For example, investment 
earnings on retirement savings are allowed to accrue tax-free while 
they remain in a retirement account. The tax code establishes 
restrictions on loans and withdrawals from retirement accounts in order 
to ensure that those tax subsidies are used for retirement savings.

TSP's Loan Program Prior to This Interim Rule

    Subject to restrictions imposed by the tax code and Internal 
Revenue Service (IRS) regulations, the TSP has, for several decades, 
offered a loan program that allows participants to borrow from their 
retirement accounts. The FRTIB is required to report loans to the IRS 
as taxable income subject to a 10% penalty after a certain number of 
loan payments are missed. Like many 401(k) plans, the TSP's technology 
systems and business processes are designed to accept loan payments 
primarily through payroll deductions to ensure that participants do not 
suffer the tax consequences of defaulting on their loans. Obviously, 
loan payments cannot be made through payroll deduction if the 
participant is not receiving a paycheck. For this reason, the FRTIB 
regulations contain a provision that makes loan eligibility contingent 
on pay status.

Necessity of This Interim Rule

    Federal employees recently experienced the longest partial 
government shutdown in United States history. Prolonged shutdowns risk 
damaging the overall long-term financial well-being of TSP participants 
and their families. Congress passed a continuing resolution on January 
25, 2019 which temporarily ended the shutdown. The continuing 
resolution only provides funding for 3 weeks which places roughly 
800,000 Federal employees under the threat of being furloughed again in 
the near future.
    The FRTIB's loan program was not designed to replace the salaries 
of Federal employees. A TSP loan is not a costless alternative to 
paying Federal employees for their work. TSP participants who take 
loans may miss out on the investment earnings that would have accrued 
if that money had remained their retirement accounts. A TSP loan will 
still have to be repaid in order to avoid the loan being declared a 
taxable distribution. Nevertheless, the FRTIB is publishing this 
interim rule in the hopes that it might provide some assistance to TSP 
participants in the event of another government shutdown.

Effect of This Interim Rule

    This interim rule amends the TSP regulations to allow certain TSP 
participants to request a loan during government shutdowns without 
regard to whether they are in pay status. To address the risk of loan 
payment default, the FRTIB will permit participants to request a 
suspension of loan payments to the extent a suspension is permitted 
under the IRS's interpretation of the Internal Revenue Code.
    This interim rule applies only to participants who are furloughed 
or excepted from furlough (i.e., continuing to work and earn pay, but 
their pay is delayed until appropriations are authorized) due to a 
government shutdown. The FRTIB's staff and contractors have designed 
manual workarounds to highly automated business processes in order to 
make this interim rule effective immediately so these participants will 
have access TSP loans in the event of another government shutdown.
    Participants who are not receiving pay for other reasons (e.g., 
administrative furlough, voluntary leave of absence, seasonal work, 
sabbatical, disciplinary suspension) remain ineligible to request a 
loan. The FRTIB is considering whether to allow these participants to 
request loans in nonpay status and will address this subject in the 
final rule. The FRTIB invites comments on this subject.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant 
economic impact on a substantial number of small entities. This 
regulation will affect Federal employees and members of the 
uniformed services who participate in the Thrift Savings Plan, which 
is a Federal defined contribution retirement savings plan created 
under the Federal Employees' Retirement System Act of 1986 (FERSA), 
Public Law 99-335, 100 Stat. 514, and which is administered by the 

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the criteria of the Paperwork Reduction Act.

[[Page 1601]]

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 
632, 653, 1501-1571, the effects of this regulation on state, local, 
and tribal governments and the private sector have been assessed. This 
regulation will not compel the expenditure in any one year of $100 
million or more by state, local, and tribal governments, in the 
aggregate, or by the private sector. Therefore, a statement under 
section 1532 is not required.

Submission to Congress and the General Accounting Office

    Pursuant to 5 U.S.C. 810(a)(1)(A), the FRTIB submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
United States before publication of this rule in the Federal Register. 
This rule is not a major rule as defined at 5 U.S.C. 804(2).

List of Subjects

5 CFR Part 1655

    Credit, Government employees, Pensions, Retirement.

Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons stated in the preamble, the FRTIB amends 5 CFR 
chapter VI as follows:


1. The authority citation for Part 1655 continues to read as follows:

    Authority: 5 U.S.C. 8432d, 8433(g), 8439(a)(3) and 8474.

2. Revise Sec.  1655.2 to read as follows:

Sec.  1655.2  Eligibility for loans.

    A participant can apply for a TSP general purpose or residential 
loan if:
    (a) More than 60 calendar days have elapsed since the participant 
has repaid in full a TSP loan of the same type.
    (b) The participant is in pay status;
    (c) The participant is eligible to contribute to the TSP (or would 
be eligible to contribute but for the suspension of the participant's 
contributions because he or she obtained a financial hardship in-
service withdrawal);
    (d) The participant has at least $1,000 in employee contributions 
and attributable earnings in his or her account; and
    (e) The participant has not had a TSP loan declared a taxable 
distribution within the last 12 months for any reason other than a 
separation from Government service.
    Paragraph (b) of this section shall not apply to loan requests made 
during a Government shutdown by participants who are furloughed or 
excepted from furlough due to the Government shutdown.

[FR Doc. 2019-01060 Filed 2-4-19; 8:45 am]