Financial Hardship
Withdrawals
In-Service
i
Table of Contents
Before You Make an In-Service Withdrawal .......................1
Consequences of Making an In-Service Withdrawal
.......................2
Financial Hardship Withdrawals ....................................3
Acceptable Reasons for Making a Financial Hardship Withdrawal
..........3
TSP Rules for Making a Financial Hardship Withdrawal
....................5
How to Apply for a Financial Hardship Withdrawal
........................7
Age-591/2 Withdrawals ...............................................7
TSP Rules for Making an Age-59 Withdrawal
............................7
How to Apply for an Age-59 Withdrawal
................................9
How In-Service Withdrawals Are Disbursed .......................9
Additional Points to Note ..........................................11
Taxes
................................................................11
Account Holds
........................................................11
Spouses’ Rights
......................................................12
In-Service Withdrawal Rules Table ................................13
ThriLine Service Center ..........................................14
1
Before You Make an In-Service
Withdrawal
An in-service withdrawal is a withdrawal that you make from your Thri Savings
Plan (TSP) account while you are still actively employed in federal civilian service
(CSRS or FERS) or the uniformed services.
1
There are two types of in-service
withdrawals: financial hardship withdrawals and age-59 withdrawals.
Note: You cannot make an in-service withdrawal from a beneficiary participant
account. (A beneficiary participant account is a TSP account that is inherited
from a deceased TSP participant.)
Before making an in-service withdrawal, keep in mind that the TSP is a
retirement savings and investment plan designed to help you save for your
future. If you are covered by FERS or are a member of the uniformed services
covered by the BRS,
2
the TSP is a critical component of your federal retirement
benefits and may represent a significant part of your retirement income. Before
you decide to withdraw money from your account while you are still employed,
carefully consider the impact of your decision on your future well-being.
Add your direct deposit information in My Account at least seven days before
you request a withdrawal. It’s safe and easy to add your bank information in
My Account. Adding direct deposit information now helps you get your money faster
when you need it. And receiving your money electronically is faster than waiting for a
check in the mail. For your protection, the destination you wish to send a withdrawal
from your TSP account must be on file for at least seven days before it can receive
funds. If you wait to add your bank information when you request a withdrawal,
you’ll need to wait at least seven days before you can request direct deposit.
CSRS refers to the Civil Service Retirement System, including CSRS Oset, the Foreign Service
Retirement and Disability System, and other equivalent government retirement plans. These
federal civilian employees were hired before January 1, 1984.
FERS refers to the Federal Employees Retirement System, the Foreign Service Pension System, and
other equivalent government retirement plans. These federal civilian employees were hired on or
aer January 1, 1984.
For TSP purposes, members of the uniformed services include members of the Army, Navy, Air
Force, Marine Corps, Coast Guard, Public Health Service, and the National Oceanic and Atmospheric
Administration, as well as members of the Ready Reserve, including the National Guard.
If you are both a federal civilian employee and a member of the uniformed services, you may have
two separate accounts. The information in this booklet applies to each account separately.
BRS is for members of the uniformed services who began service on or aer January 1, 2018, and
others who opted into the system.
2
Consequences of Making an In-Service Withdrawal
An in-service withdrawal aects your ability to accumulate savings and, in some
cases, to defer taxes. This is because of the following:
•
When you make an in-service withdrawal, you permanently reduce your
TSP account by the amount you withdraw, and you also give up any future
earnings on that amount. Once we process your withdrawal, you cannot
return or repay the money to your account, and you cannot convert your
withdrawal to a loan.
•
You must pay federal and, in some cases, state income taxes on the
taxable portion of your withdrawal. If you make a financial hardship
withdrawal before age 59½, you may also have to pay a 10% early
withdrawal penalty tax. Note: You do not have to pay federal taxes on any
tax-exempt or Roth contributions that are included in your withdrawal.
However, the earnings on traditional contributions are always taxable.
The earnings on Roth contributions are taxable unless they meet the IRS
requirements for a qualified distribution.
3
You should think about these consequences before making an in-service
withdrawal. If you are in pay status and are eligible for a TSP loan, you may want
to consider that option because it has certain advantages over a withdrawal.
When you take a loan, it is not taxable income. Also, you repay your own TSP
account for the amount of the loan (plus interest) and therefore continue to
accrue earnings on the money you borrowed aer you pay it back.
For more information about TSP loans, read the booklet Loans, which is available
on tsp.gov.
The chart on the next page compares how taking a TSP loan or making an
in-serv ice withdrawal would aect your account.
3 Roth earnings become qualified (i.e., paid tax-free) when the following two conditions have
been met: (1) 5 years have passed since January 1 of the calendar year in which you made your
first Roth contribution, and
(2) you are age 59 or older, permanently disabled, or deceased.
Note: We cannot certify to the IRS that you meet the Internal Revenue Code’s definition of
disability when your taxes are reported. Therefore, you must provide the justification to the IRS
when you file your taxes.
3
Loans In-Service Withdrawal
Cost to You
$50 fee for a general
purpose loan
$100 fee for a primary
residence loan
Retirement savings permanently reduced
by amount of withdrawal
Eect on
Taxes
None (unless loan is not
paid back and a taxed
loan is declared)
Immediate tax liability (unless age-59½
withdrawal is transferred to an IRA or
eligible employer plan)
Possible additional 10% early withdrawal
penalty tax
Eect on
Earnings
No earnings on amount of
loan until funds are repaid
No earnings on amount withdrawn
Financial Hardship Withdrawals
A financial hardship withdrawal is a withdrawal you make while still employed
because of genuine financial need. You must pay income tax on the taxable
portion of your financial hardship withdrawal, and you may also have to pay a
10% early withdrawal penalty tax.
4
Acceptable Reasons for Making a Financial Hardship
Withdrawal
Acceptable reasons for making a financial hardship withdrawal include negative
cash flow and extraordinary expenses. A worksheet in My Account on tsp.gov
can help you determine the amount of your hardship.
Negative cash flow. You have negative cash flow if your net income is less than
your expenses on a recurring basis. If you believe you have negative monthly
cash flow, use the worksheet in My Account to determine how much it is. To
get an accurate answer using the worksheet, you’ll need to have the following
information:
Gross monthly income. Include your monthly pay before taxes and other
deductions and any other monthly income, such as child support. Include your
spouse’s income as well. The online worksheet needs this total and the number
of people in your family to determine a reasonable level of monthly expenses.
4 For more information, see the booklet Tax Rules about TSP Payments available on tsp.gov.
4
Net monthly income. Start with your gross monthly income and subtract
monthly federal paycheck deductions, such as tax withholding, Social Security,
and federal retirement deductions.
Total fixed monthly expenses. Include your rent or mortgage; real estate tax;
your homeowner’s or renter’s insurance; monthly household utilities; necessary
household help due to illness or injury; and any expenses you pay for alimony,
maintenance, or child support. You should also include any installment loan
payments other than those related to a TSP loan. Do not include credit cards or
charge accounts or any interest charges on them.
Extraordinary expenses. Extraordinary expenses that are not part of your
regular monthly cash flow can also contribute to your financial hardship. You
may only include expenses that you have not yet paid and that will not be
reimbursed to you. The following are extraordinary expenses you can include in
your financial hardship:
Eligible medical expenses including the following:
•
Any medical expense that you have not yet paid that would be eligible
for deduction on your federal income tax return. The expense must have
been incurred as the result of a medical condition, illness, or injury to
you, your spouse, or individuals you can claim as dependents for federal
income tax purposes at the time you request your financial hardship
withdrawal.
•
Expenses that you have not yet paid for household improvements needed
because of a medical condition, illness, or injury to you, your spouse,
or your dependents. Examples include the installation of structural
improvements such as wheelchair ramps, railing and support bars,
modified doorways and stairways, or elevators.
Eligible personal casualty losses including damage, destruction, or loss of
property resulting from an identifiable event that is sudden, unexpected, or
unusual. Such losses can be the result of earthquakes, hurricanes, tornados,
floods, storms, fires, or similar causes. They can also be the result of property
the or automobile accidents that are not caused by your willful negligence or
willfully destructive act.
Generally, eligible costs of repairs and replacement of personal casualty losses
are those that are eligible for deduction on your federal income tax return
(without taking into consideration the IRS limits on income, the fair market
value of the property, or the number of events causing the casualty loss).
5
However, eligible personal casualty losses do not include
•
loss of deposits when a bank or other financial institution becomes
insolvent or bankrupt;
•
losses to a business or income-producing property (even though such
losses are deductible for federal income tax purposes); or
•
damage from normal wear and tear, such as damage or destruction
caused by termites or moths or progressive deterioration of your property.
Eligible legal expenses, limited to unpaid legal fees and court costs related to
a separation or divorce from your spouse.
Legal expenses that cannot be used to justify a financial hardship include the
following:
•
Court-ordered payments to a spouse or former spouse and child support
payments. However, if you are making a financial hardship withdrawal
because of negative cash flow, such payments should be included in your
calculation of expenses.
•
Support payments or costs of obtaining prepaid legal services or other
coverage for legal services.
Expenses and losses from a major disaster declared by the Federal
Emergency Management Agency (FEMA). Principal residence or principal
place of employment at the time of the disaster must be located in the area
designated by FEMA.
TSP Rules for Making a Financial Hardship Withdrawal
The following rules apply to making a financial hardship withdrawal:
•
You cannot request less than $1,000.
•
The money may only be taken from your own contributions (including
money you may have rolled over to the TSP from IRAs or eligible
employer plans) and the earnings on those contributions.
•
You cannot withdraw directly from money invested in the TSP’s mutual
fund window. You must first transfer that money to a TSP fund before
withdrawing it.
•
If you have both traditional money and Roth money available for a
hardship withdrawal as described above, you must specify the source
6
of the withdrawal. You can choose to take traditional money only, take
Roth money only, or take money from both pro rata. Pro rata means it will
have the same percentages of Roth and traditional as are in the eligible
portion of your account balance. Example: You have $100,000 of your own
contributions and earnings on those contributions, including $80,000
traditional and $20,000 Roth. If you take a $10,000 pro rata withdrawal,
$8,000 will come from your traditional balance and $2,000 will come from
Roth.
•
Your withdrawal must be used to cover a genuine financial hardship
(based on the reasons previously described) while you are actively
employed by the federal government or the uniformed services.
•
Your financial hardship withdrawal is limited to the amount of your financial
need.
5
When calculating the amount of your financial hardship, you cannot
use any expenses that have already been paid or that are reimbursable to
you from insurance or other sources.
•
If the amount of employee contributions and earnings in your chosen
source (traditional, Roth, or total) drops below the amount you requested
while the request is pending, we will process your request and send you
whatever amount you have available in that source. Keep in mind that this
amount will not cover the shortfall caused by your hardship.
•
You cannot make another financial hardship withdrawal from your
account for a period of six months from the time your payment is
processed. This is especially important if you have chosen a Roth-only or
traditional-only withdrawal. As noted in the previous rule, if your eligible
funds amount has dropped below your requested amount, we will not tap
into your other source. And you will not be able to access that source to
make up the dierence for six months.
•
You can make a financial hardship withdrawal only from an account
that’s associated with your active employment. So, for example, if you
have a uniformed services account but have le the uniformed services
and are now a federal civilian employee, you can only make a hardship
withdrawal from your civilian TSP account. If both of your accounts are
associated with your active employment (e.g., you’re a federal civilian
employee and a reservist), the rules explained here apply to each account
separately.
Note: Contributions to your TSP account will continue unless you stop them.
5 If you have suicient eligible funds available, you may increase your withdrawal to 125% of the
financial need to cover tax withholding. See the table on page 13.
7
How to Apply for a Financial Hardship Withdrawal
Once you’ve read this booklet and the TSP booklet Tax Rules about TSP Payments
and are ready to request a withdrawal, log in to My Account to begin the request
or contact us through one of the ThriLine options at the end of this booklet.
When you request your financial hardship withdrawal, you will have to certify
under penalty of perjury that you have a genuine financial hardship. Although
you don’t have to submit income information or documentation of expenditures
with your financial hardship withdrawal request, you should retain such
information and documentation for future reference.
Age-591/2 Withdrawals
If you are 59 or older, you can make withdrawals from your TSP account while
you are still employed. You must pay income tax on the taxable portion of your
withdrawal unless you roll it over to an IRA or other eligible employer plan.
TSP Rules for Making an Age-591/2 Withdrawal
The following rules apply to making an age-59 withdrawal:
•
You must be at least age 59½. We determine your age based on the date
of birth reported by your employing agency or service. If that date is
incorrect, you must ask your agency or service to change it.
•
You can make up to four age-59 withdrawals per calendar year.
•
You can only withdraw funds in which you are vested (i.e., funds you are
entitled to keep based on your years of service). Being vested means that
you’re entitled to keep your Agency/Service Automatic (1%) Contributions
(and their earnings) aer you work in the federal government or uniformed
services for a certain number of years.
6
You’re always vested in your own
contributions, Agency/Service Matching Contributions, and the earnings
on both those contribution types.
•
You cannot withdraw directly from money invested in the TSP’s mutual
fund window. You must first transfer that money to a TSP fund before
withdrawing it.
6 See the TSP booklet Summary of the Thri Savings Plan for more information about vesting.
8
•
You have a number of withdrawal options, depending on whether you
have both traditional and Roth money in your account or just one source.
If you only have one source (traditional or Roth), you can
− withdraw a specific dollar amount from your vested account balance
as long as it’s at least $1,000, or
− withdraw your entire vested account balance.
If you have both traditional and Roth, you have those same two
options, but you can also
− withdraw a specific dollar amount ($1,000 minimum) and request that
it come only from traditional or only from Roth,
− withdraw all of your traditional money, or
− withdraw all of your Roth money.
If you choose instead to withdraw money from both traditional and Roth,
your withdrawal will be taken pro rata from both. That means that your
withdrawal will have the same proportion of traditional and Roth money
as you have in your total vested account balance. Example: You have
$100,000 in your vested account balance, including $80,000 traditional
and $20,000 Roth. If you take a $10,000 withdrawal, $8,000 will come from
traditional and $2,000 will come from Roth.
•
You can make an age-59 withdrawal only from an account that’s
associated with your active employment. So, for example, if you have
a uniformed services account but have le the uniformed services and
are now a federal civilian employee, you can only make an age-59
withdrawal from your civilian TSP account. If both of your accounts are
associated with your active employment (e.g., you’re a federal civilian
employee and a reservist), the rules explained here apply to each
account separately.
•
You may be able to roll over all or part of your age-59 withdrawal to
a traditional IRA or an eligible employer plan.
7
However, your eligibility
7 A traditional IRA is an individual retirement account described in IRC § 408(a) or an individual
retirement annuity described in IRC § 408(b). The traditional IRA category does not include an
inherited IRA, a Roth IRA, or a Coverdell Education Savings Account.
A Roth IRA is an individual retirement account described in IRC § 408A.
An eligible employer plan is a plan qualified under IRC § 401(a) (including a § 401(k) plan, profit-
sharing plan, defined benefit plan, stock bonus plan, and money purchase plan); an IRC § 403(a)
annuity plan; an IRC § 403(b) tax-sheltered annuity; or an IRC § 457(b) plan maintained by a
governmental employer.
9
to roll over, as well as how taxes are applied, depends on the source of
money contained in your withdrawal (traditional or Roth) and the type of
account that will receive your rollover. Depending on the type of plan you
move your money into, the funds you roll over may become subject to
plan rules dierent from those that govern the TSP.
For more detailed information about rolling over your age-59
withdrawal, see the TSP booklet Tax Rules about TSP Payments
.
How to Apply for an Age-591/2 Withdrawal
Once you’ve read this booklet and the TSP booklet Tax Rules about TSP Payments
and are ready to request a withdrawal, log in to My Account to begin the request
or contact us through one of the ThriLine options at the end of this booklet.
How In-Service Withdrawals Are
Disbursed
Your withdrawal will be made pro rata from among the TSP funds in your chosen
source (traditional, Roth, or both).
8
For example, if you choose to withdraw
only from traditional and your traditional money consists of 50% C Fund, 25%
F Fund, and 25% G Fund, your withdrawal will also be 50% C Fund, 25% F Fund,
and 25% G Fund. In this case, your Roth investments are not considered in
deciding which of your funds to withdraw from.
If you have only one source (traditional or Roth) or you’ve chosen to withdraw
from both sources pro rata, your withdrawal will have the same percentages of
TSP funds as are in your total available account balance.
Any amount distributed from Roth will contain a proportional amount of
Roth contributions and earnings. You cannot choose to receive only the
contributions. This is only significant if your account includes nonqualified
earnings, in which case you would have to pay taxes on a portion of your
withdrawal. See more about this on page 2.
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. You cannot choose to receive only
8 Money invested in the TSP mutual fund window, which cannot be withdrawn directly, is not
considered in the pro rata calculation.
10
tax-exempt contributions. You will not have to pay taxes on the portion of your
withdrawal made up of tax-exempt contributions. The earnings on tax-exempt
contributions in your traditional balance, however, are not tax-exempt.
We disburse withdrawals each business day. You can log in to My Account on
tsp.gov or contact us through one of the ThriLine options at the end of this
booklet to find out the status of your withdrawal. Once your withdrawal has
been disbursed, you cannot return it. (See 5 C.F.R. § 1650.17(b).)
At your request, we will directly deposit your withdrawal into your checking or
savings account. Otherwise, we will mail your in-service withdrawal check—and
any correspondence related to your withdrawal—to the permanent address
provided by your agency or service or your alternate address if you’ve provided
one. If you are rolling over your age-59 withdrawal to your IRA or eligible
employer plan, you can choose whether to have the check mailed to your
address on record or to your IRA or eligible employer plan.
For your protection, the destination you wish to send your withdrawal to must
be on file for at least seven days before it can be used to receive funds. This
includes any postal address or any direct deposit address you have entered.
Lost, stolen, damaged, or misdirected checks can take six weeks or longer to
replace.
We can only process one request at a time from the same account. This includes
both loan and withdrawal requests. You will not be able to request either type
of transaction while you have one pending.
Be sure to keep the address in your TSP record up to date,
even if you’re receiving your withdrawal through direct
deposit. You can only change your permanent address
with your employer. If you’ve provided us with an alternate
address, you can change that in My Account.
11
Additional Points to Note
It is important to understand how your in-service withdrawal will be aected by
taxes, account holds, and spouses’ rights rules.
Taxes
You are responsible for paying taxes on the taxable portion of an in-serv ice
withdrawal. We report all TSP withdrawals to the IRS—and to you—on IRS Form
1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing
Plans, IRAs, Insurance Contracts, etc.
We also withhold for federal income tax.
However, you may decrease the percentage withheld or waive withholding
when you make a financial hardship withdrawal.
Dierent tax and withholding rules apply to financial hardship withdrawals
and age-59 withdrawals. For detailed information about relevant tax and
withholding rules, read the TSP booklet Tax Rules about TSP Payments.
Account Holds
Some situations may cause a hold to be placed on your account. Examples
include the following:
•
A court order that awards all or part of a TSP account to a current or
former spouse (including a separated spouse).
•
A legal process that enforces obligations to pay child support or alimony,
or to satisfy judgments for child abuse.
•
A federal tax levy.
•
A criminal restitution order pursuant to the Mandatory Victims Restitution
Act (MVRA).
•
A hold we place on your account because of suspected fraud.
•
A hold we place on your account for administrative reasons such as
account corrections or adjustments.
You cannot request a distribution until the matter that caused the hold is
settled and the hold is removed from your account. However, any required
minimum distributions (RMDs) will be disbursed by the appropriate deadline.
12
For more information about court orders, obtain the TSP booklets Court Orders
and Powers of Attorney and Tax Rules about TSP Payments
. Both are available on
tsp.gov.
In addition to the account holds described, you may voluntarily place a lock
on your account to protect it. When you do so, you’ll be asked to set an unlock
key. You will have to use the unlock key before taking a distribution.
Spouses’ Rights
Your spouse has certain rights with regard to your in-service withdrawal, even
if you are separated from your spouse. Therefore, on your request for an in-
service withdrawal, you must indicate whether or not you are married. If you
are married, the following rules apply:
•
If you are a FERS participant or a member of the uniformed services,
the law requires your spouse’s consent to your in-service withdrawal. If
your spouse’s whereabouts are unknown, or if exceptional circumstances
make it impossible to obtain your spouse’s signature, you must contact us
to apply for an exemption.
•
If you are a CSRS participant, we must notify your spouse before your in-
service withdrawal can be completed. If you do not know the whereabouts
of your spouse, you must contact us to apply for an exemption.
The criteria for an exemption are strict. The fact that there is a separation
agreement, a prenuptial agreement, a protective order, or a divorce petition
does not in itself support a claim of exceptional circumstances.
13
In-Service Withdrawal Rules Table
Financial Hardship Age-591/2
Money you
can withdraw
Your employee contributions and
their earnings
Your vested account balance
Amount you
can withdraw
$1,000 or more $1,000 or more, or your entire
vested balance
When you can
withdraw
When you are currently in federal
civilian or uniformed service and
have a genuine financial hardship
to which you can attest under
penalty of perjury
At age 59½ or older
Acceptable
reasons for
withdrawal
Negative cash flow
Eligible unpaid medical expenses
Eligible unpaid personal casualty
losses
Eligible legal expenses for separation
or divorce
Expenses and losses from a major
disaster declared by FEMA
No specific reason needed
Tax
withholding
10% for federal tax on the taxable
portion. This percentage can be
increased, decreased, or waived.
You may also increase the requested
withdrawal amount up to 125% of the
amount of the approved financial need
to cover tax withholding.
Mandatory 20% for federal
tax on the taxable portion
(percentage can be increased)
No withholding on taxable
amounts rolled over
Consequences
Taxable amount withdrawn becomes
subject to tax for the year of the
withdrawal
Permanent reduction of retire ment
savings and future earnings
10% federal penalty tax if you are
under age 59½ (exceptions apply)
Taxable amount withdrawn
becomes subject to tax for
the year of the withdrawal
(unless rolled over to an IRA
or an eligible employer plan*)
Permanent reduction of
retirement savings and
future earnings
Spouses’
rights
For FERS and uniformed service participants: spouse’s consent required
For CSRS participants: TSP required to notify spouse
Frequency
allowed
No limit, but a 6-month waiting
period between withdrawals
Up to 4 per calendar year per
active civilian or uniformed
services account
*
The money you roll over to a traditional IRA or eligible employer plan will not be taxed until you withdraw
it from that IRA or plan. However, any traditional money you roll over to a Roth IRA will be taxed for the
year it is disbursed from the TSP.
14
ThriLine Service Center
Phone:
1-877-968-3778 (United States, toll-free)
+ 1-404-233-4400 (outside the United States, not toll-free)
7 a.m.–9 p.m. eastern time, Monday through Friday
Fax:
1-276-926-8948
Mail:
ThriLine Service Center
c/o Broadridge Processing
PO Box 1600
Newark, NJ 07101-1600
TSPBK12 (5/2024)
PREVIOUS EDITIONS OBSOLETE
