CARES Act Provisions For Loans Go Into Effect
The TSP announced today that they have implemented loan provisions of the CARES Act to help federal employees who are struggling financially due to the Coronavirus pandemic. When Congress passed the CARES Act in March, 2020, they relaxed some regulations around the ability of Americans to borrow against their employer-sponsored retirement plans. Federal employees can now borrow up to $100,000 from their TSP (previously loans were limited to $50,000), and the percentage they can borrow has been increased from 50% of their account value to 100% of their account value. Note that in order for the employee to take advantage of these changes, they must be able to document their eligibility for such a loan. Eligible individuals are:
Employees or their spouse or their dependent who have been diagnosed with Coronavirus disease by a test approved by the Centers for Disease Control and Prevention.
Persons who are experiencing adverse financial consequences as a result of being quarantined, furloughed, or laid off, or having reduced work hours, or being unable to work due to lack of child care due to the virus.
In addition to increasing the loan amounts, the Act also allows for the suspension of loan payments for the rest of the calendar year 2020. This applies to current loans as well as to loans taken between now and Nov. 30, 2020. Form TSP-46, CARES Act Loan Suspension Request should be used to request such a waiver. The TSP website notes that if you plan to take a new loan, as well as placing your current loan on suspension, you should complete the new loan first. By doing so, the loan payment suspension request will apply to both loans.
Connolly’s Letter in Defense of I Fund Change
In other TSP news, the ever-growing controversy surrounding the decision to hold off on the implementation of recommended I fund changes continues to make headlines. Last week it was reported that George Connolly (D-VA), who chairs the House Subcommittee on Government Operations wrote to the Department of Labor (DOL) Secretary expressing concern that the White House and DOL were inappropriately interfering in the TSP, the retirement plan of public servants. The concern arises from the decision announced by the Federal Retirement Thrift Investment Board (FRTIB) on May 13th that it would delay implementation of I fund changes which had been approved in 2017 and were set to take effect in the coming months. The decision by the FRTIB followed pressure from both the White House and the Dept. of Labor. Connolly states in his letter:
“With all due respect, please keep President Trump away from the retirement plans of federal employees and servicemembers. He has done enough damage already.”
Rep. Connolly further states that DOL has “overstepped and misused its authority” and requested all documents relating to the DOL’s recent actions with regards to TSP be turned over to the Committee. The Federal Retirement Thrift Investment Board is an independent agency and states as its mission “To Administer the TSP solely in the interest of participants and beneficiaries.” We will continue to follow this important story.
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**Written by Jennifer Meyer, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Jennifer Meyer and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.**
TSP CARES Act Provisions for Loans