The information we’re providing here is current but subject to change as we receive additional guidance and information.
The CARES Act creates special rules for most types of TSP withdrawals made by participants affected by COVID-19. It also allows us to create a new, temporary withdrawal option that waives the usual in-service withdrawal requirements and allows all COVID-affected participants to waive tax withholding. See below for details.
The CARES Act also allows us to offer temporary loan options to participants affected by COVID-19. Learn more.
To be eligible for the favorable tax treatment described below or to apply for a TSP CARES Act Withdrawal, 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- having a job offer rescinded or a start date for a job delayed.
Favorable tax treatment for existing withdrawal types
Many TSP participants who meet the definition of a qualified individual can take advantage of the favorable tax provisions of the CARES Act using withdrawal types for which they’re already eligible. If you’re a current civilian federal employee or member of the uniformed services and eligible under the existing rules, such withdrawals include hardship withdrawals and age-based in-service “59½” withdrawals. If you’re separated from federal service or a beneficiary participant, these withdrawals include single payments and some installment payments.
Only coronavirus-related distributions are eligible for the favorable tax treatment described here. 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, which the IRS is expected to make available before the end of 2020.
The tax advantages for qualified individuals taking coronavirus-related distributions are as follows:
- The IRS will waive 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.
CARES Act withdrawal
You may make a one-time withdrawal of up to $100,000 from a civilian or uniformed services account. For those still in federal service, the usual requirements that you be at least 59½ years old or certify that you meet specific financial hardship criteria are waived. Though you may request that we withhold money from your withdrawal for federal income tax, we will not automatically do that. This withdrawal is eligible for the favorable tax treatment described above, with all of the same options and restrictions. The deadline for applying for this withdrawal is December 15, 2020. When you apply for this withdrawal, you are self-certifying that you meet one or more of the conditions listed above. To protect your privacy, do NOT send supporting documentation with your application, especially medical information.