for Agency TSP Representatives
Upcoming Change to Eliminate Financial Hardship In-Service Withdrawal Six-Month Suspension Rule
The Thrift Savings Plan (TSP) will soon eliminate the six-month suspension of TSP contributions for participants who have taken a financial hardship in-service withdrawal. Implementation of this rule change will occur on September 15, 2019, at the same time that withdrawal changes related to the TSP Modernization Act of 2017 take effect. Legislation to allow this change came under the Bipartisan Budget Act of 2018, Public Law 115-123 (132 Stat. 64), which the President signed on February 9, 2018.
This bulletin provides advance notice to agency payroll offices and HR staff so they can inform employees who have taken a financial hardship in-service withdrawal of this new rule. This information also applies to any modifications needed for payroll systems to accommodate TSP participants who request to resume their TSP contributions beginning September 15, 2019.
Key Points to Note:
- Any participant who received a financial hardship in-service withdrawal and is suspended from contributing to the TSP will be able to re-start TSP contributions effective September 15, 2019, even though the participant may not have completed the six-month suspension period.
- Participants whose TSP contributions were suspended as a result of a financial hardship in-service withdrawal will receive a TSP notice alerting them that they can resume contributions as of September 15, 2019. Restarting TSP contributions is the participant’s responsibility.
- Participants and agencies will still need to follow current procedures to resume contributions by having the participant access their employer pay system, or by completing Form TSP-1, Election Form.
- Report 5501 (Financial Hardship In-Service Withdrawal Report) will be generated through September 13, 2019.
- As of September 15, 2019, Report 5501 (Financial Hardship In-service Withdrawal Report) will be obsolete as any financial hardship in-service withdrawals taken on or after that day will not require a six-month suspension of contributions.
The TSP will publish a separate bulletin in the third quarter of 2019 with more details providing guidance for agency HR and payroll offices to implement these changes in conjunction with changes from the TSP Modernization Act of 2017.