The help of the new CARES law is here for TSP participants
Tens of thousands of Thrift Savings Plan participants have so far taken advantage of options included by Congress in pandemic relief legislation, and many loan and withdrawal options are only weeks away.
The Law on Aid, Relief and Economic Security (CARES) against the coronavirus gave TSP participants, along with other Americans enrolled in their own 401 (k) retirement plans, a few more options to help them borrow from their own accounts or keep more of their savings.
The Federal Retirement Thrift Investment Board said it had the option to implement these provisions, but chose to adopt all four.
To be eligible for most of these provisions, participants must have been diagnosed with coronavirus, have a spouse or dependent who has the virus, or suffered adverse consequences as a result of the pandemic. “Negative consequences” include loss of work hours, dismissal, leave or quarantine, or inability to work due to lack of child care or school options.
The CARES Act, for example, allowed participants of any age to make a one-time withdrawal from their TSP, up to a value of $ 100,000. Participants have up to three years to repay the distribution, and the typical 10% tax penalty on early withdrawals has been removed.
Some 13,720 participants have withdrawn from the CARES Act since July 11, when the TSP made the option effective. Participants made withdrawals worth an average of $ 26,900, said Tanner Nohe, FRTIB project manager.
“A lot of people have visited the page and taken the withdrawal of the CARES law,” he told the board last week at the monthly FRTIB meeting.
Participants have until December 15 to withdraw from the CARES Act, but the FRTIB will continue to process them until December 29.
TSP participants with an outstanding loan can withhold payments until December 31. Once the year is over, the TSP will amortize a participant’s loan for a new payment amount or extend the repayment date, Nohe said.
By mid-July, 2,922 participants had suspended a TSP loan.
Participants have until Nov. 30 to submit documents for a loan payment suspension, the TSP said.
In addition, the TSP allowed participants to take out a loan of up to $ 100,000. Under usual circumstances, TSP loans are limited to $ 50,000.
Nearly 1,200 participants took out a CARES Act loan worth more than $ 50,000, with an average allowance totaling $ 74,500, the TSP said.
CARES Act loans are available until September 22.
Finally, the CARES law allowed the TSP to suspend all minimum required distributions (RMD) for 2020.
Under the current rules, retirees aged 72 or over must withdraw a minimum amount from their account each year. The minimums are determined using a specific formula, which is based on a retiree’s account balance at the end of 2019.
Although the TSP quickly suspended RMDs in April, it took several months to set up new loan and withdrawal options.
“We had a lot of changes to make for loan changes, as well as withdrawals,” Nohe said. “For loans, we made changes to 10 apps and had to work on around 151 test cases. For withdrawals, we tried to take advantage of current features, but we still had to make changes to six different apps and performed 102 test cases. This somewhat explains the delay between the adoption of the law in March and the implementation in June and July of this year. It was a lot of work undertaken by a lot of people at the agency.
Many of these provisions expire at the end of 2020. Will Congress extend them?
This part is unclear.
The new L funds are there too
Beyond the launch of the provisions of the CARES law, the TSP has also been busy with the recent deployment of six new lifecycle funds.
Participants should have seen L-funds in five-year increments by now, instead of the usual 10. The L 2020 fund has disappeared and the L 2065 fund is new.
The TSP transferred some $ 21 billion in assets from 260,000 registered participants to the L 2020 fund and transferred them to the L income fund.
And last Monday, about 62,000 participants invested $ 4.7 billion in the new L funds, according to the FRTIB.
The TSP created the L funds in 2005. The objective was to create a series of funds that allow participants to better target their investments according to their own objectives and deadlines, adjusting the risk downwards as the investment approaches. retirement. The new five-year lifecycle increases give plan members the flexibility to further target their investments to an even more specific retirement date.
Almost 13,000 new participants have enrolled in the TSP since the launch of the new L funds. All have been allocated to a new age-appropriate fund, including 4,000 participants born in 2000 or later.
Most of these new entrants are members of the Uniformed Services and have been assigned to the brand new 2065 fund.
The future is here.
Almost useless factoid
By Brian Bradley
Half of the world’s geothermal features and two-thirds of all the world’s geysers are found in Yellowstone National Park.
Source: (Mental Floss)