FERS Participants and Agency Contributions
Although your Agency Matching Contributions will be suspended for a period of 6 months after taking a financial hardship withdrawal, you will continue to receive your Agency Automatic (1%) Contributions.
Reporting TSP Distributions to the IRS
In January following the year of distribution, the TSP reports all TSP distributions to the Internal Revenue Service—and to you—on IRS Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
Documenting Your Financial Hardship
Although you will not have to submit documentation to the TSP to substantiate your financial hardship, you should retain it for future reference because you must certify on the form that you have a genuine financial hardship and the reason for the financial hardship withdrawal.
Proportional Distributions
Withdrawals are paid proportionally from your traditional and Roth balances, and from each TSP fund in which you have investments. If you are a uniformed services member with tax-exempt contributions in your traditional balance, your withdrawal will contain a proportional amount of tax-exempt contributions as well.
Is your address up-to-date?
Be sure that your agency or service has your current mailing address and provides it to the TSP before you submit your in-service withdrawal form.

Eligibility Rules

 

The amount you withdraw from your account for a financial hardship must be limited to your financial need. To be eligible, your financial need must result from at least one of the following four conditions:

  • Recurring negative monthly cash flow
  • Medical expenses (including household improvements needed for medical care) that you have not yet paid and that are not covered by insurance
  • Personal casualty loss(es) that you have not yet paid and that are not covered by insurance
  • Legal expenses (such as attorneys' fees and court costs) that you have not yet paid for separation or divorce from your spouse

Additional Requirements for Financial Hardship Withdrawals

In addition to the eligibility rules, the following apply:

  • You cannot withdraw less than $1,000.
  • You may only withdraw your own contributions and any earnings those contributions have accrued.
  • If you have two separate TSP accounts — a civilian TSP account and a uniformed services account — you can only make a financial hardship withdrawal from the account associated with your active employment at the time of your withdrawal. However, if both of your accounts are associated with your active employment, you can make a financial hardship withdrawal from each account.
  • You are limited to only one financial hardship withdrawal in a 6-month period.
When you complete your application, you will be required to certify, under penalty of perjury, that you have a genuine financial hardship.

Consequences of Financial Hardship Withdrawals

 

Your financial hardship withdrawal is subject to Federal income tax and, in some cases, state income tax. If you are younger than 59½, you may have to pay a 10% early withdrawal penalty tax. Any tax-exempt or Roth contributions included in your withdrawal are not subject to Federal income tax; neither are any qualified Roth earnings.

After making a financial hardship withdrawal, you cannot contribute to your TSP account for 6 months. If you are a FERS participant, you will not receive any Agency Matching Contributions for the period during which you are not making employee contributions. However, your Agency Automatic (1%) Contributions will continue.

At the end of the 6-month period, your employee contributions will not resume automatically. You must make a new contribution election on Form TSP-1, Election Form (TSP-U-1, uniformed services) or your agency or service's electronic system, if it has one. Your contributions will be allocated according to your most recent contribution allocation on file unless you make a new allocation.

If you are a member of the uniformed services, when your employee contributions from basic pay stop, any contributions from incentive pay and special pay, including bonuses, will also stop.


Tax Considerations

 

Your financial hardship withdrawal is considered a non-periodic payment for Federal income tax purposes. The TSP will withhold 10% of the taxable portion of your withdrawal for Federal income tax unless you increase or waive the amount of withholding.

Also, if you make a financial hardship withdrawal before age 59½, you may be subject to a 10% early withdrawal penalty tax on the taxable portion of your withdrawal. This penalty tax is in addition to the ordinary income tax you will have to pay.

For more detailed information about the tax rules affecting in-service withdrawals, refer to the Tax Notice, "Important Tax Information About Payments From Your TSP Account".


Applying for a Financial Hardship Withdrawal

 

You can apply for a financial hardship withdrawal in one of two ways.

Online by Logging into My Account

Begin your Financial Hardship In-Service Withdrawal Request by going to My Account: Withdrawals. You can begin and, in some cases, complete your request online. It depends on whether you are required to obtain your spouse's signed consent and whether you want to receive your money by check or by direct deposit to your bank account.

Paper Request

Complete TSP-76, Financial Hardship In-Service Withdrawal Request, Financial Hardship In-Service Withdrawal Request and mail or fax it to the TSP. The form is available on this website, through the ThriftLine, or from your agency or service.

If you have a pending application for another in-service withdrawal or for a TSP loan at the time your financial hardship withdrawal request is received, your request will not be accepted. Only one request for an in-service withdrawal or a loan is permitted at a time.

Receiving your Financial Hardship Withdrawal

 

Your financial hardship withdrawal check will be mailed to the address in your TSP account record. However, if you make a paper withdrawal request, you may request to have your withdrawal payment electronically deposited into your checking or savings account.

For security reasons, if you complete your request online, you will not have the option of receiving an electronic deposit of your funds.

It will take several weeks from the time the TSP receives your properly completed form until the time it sends your check.

To find out the status of your in-service withdrawal, visit My Account: Withdrawals or call the ThriftLine. The TSP will also notify you in writing when your request has been processed.