Withdrawals and repayments
- Qualified individuals
- Coronavirus-related distributions
- Favorable tax treatment for coronavirus-related withdrawals
- Repaying a coronavirus-related distribution
The CARES Act included favorable tax provisions for most types of TSP withdrawals made by participants affected by COVID-19. It also allowed us to create a new, temporary withdrawal option that waived the usual in-service withdrawal requirements and allowed all COVID-affected participants to waive tax withholding.
The deadlines for taking a withdrawal with favorable tax treatment and for taking the special TSP CARES Act Withdrawal have both passed. The information on this page is for eligible TSP participants who took a withdrawal between January 1 and December 30, 2020.
To be eligible for the favorable tax treatment described below, you must be a qualified individual. You’re a qualified individual if you meet at least one of the following criteria:
- You are or have been diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act).
- Your spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is or has been diagnosed with such virus or disease by such a test.
- Due to COVID-19, you are experiencing adverse financial consequences as a result of you, your spouse, or a member of your household
- being quarantined;
- being furloughed or laid off or having work hours reduced;
- being unable to work due to lack of child care;
- having to close or reduce hours of a business;
- having a reduction in pay or self-employment income; or
- having a job offer rescinded or a start date for a job delayed.
Only coronavirus-related distributions are eligible for the favorable tax treatment provided by the CARES Act. As defined by the Internal Revenue Service (IRS), a coronavirus-related distribution is “a distribution (withdrawal) that is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.” That means $100,000 is the maximum amount across all your retirement plans combined that you can apply these tax advantages to. You must designate your withdrawal(s) as a coronavirus-related distribution when you file your taxes. To do that, you’ll file Form 8915-E.
Favorable tax treatment for coronavirus-related withdrawals
The tax advantages for qualified individuals who took coronavirus-related distributions are as follows:
- The IRS waived the 10% additional tax on early distributions.
- You may spread the taxable income “ratably” over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you could report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. This is optional; you can also choose to include all of the income in the year of the withdrawal.
- You may repay all or part of the amount of your coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that you received the distribution. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct plan-to-plan transfer so that you do not owe federal income tax on the distribution. The law allows you to repay coronavirus-related distributions to the plan from which you received it or to another eligible retirement plan.
Repaying a coronavirus-related distribution
To make a repayment of a coronavirus-related distribution to your TSP account as described in the previous section, complete Form TSP-60 (to repay into your traditional balance) or Form TSP-60-R (to repay into your Roth balance). By signing the form, you are self-certifying that you are a qualified individual and that the withdrawal you are repaying was a coronavirus-related distribution. To protect your privacy, do NOT send medical information with your application. The terms “qualified individual” and “coronavirus-related distribution” are both defined earlier on this webpage.
Submit the completed and signed form TSP-60 or TSP-60-R, any documentation required by the form, and a check for the amount you are repaying to the address provided.