September 30, 2013
Federal employees forced onto unpaid leave due to a government shutdown must cease payments into their federal retirement plan accounts upon entering non-pay status.
Employee contributions into the Thrift Savings Plan must come from payroll deductions, meaning employees on furlough cannot make payments into their plans. Agencies are also prohibited from matching contributions into their employees’ plans during this time.
Those contributions could be retroactively paid, however, should Congress decide to issue back pay to furloughed employees. Excepted employees, whose work is deemed necessary during a shutdown as it protects human lives or property, are guaranteed back pay by federal statute, and therefore their personal and agency TSP contributions would also be deducted and paid retroactively. Those contributions would be made after Congress passes a continuing resolution or appropriations bill and the shutdown is brought to an end.
Federal workers in non-pay status are also barred from taking out loans on their TSP accounts, as the payments on those loans must also come from payroll deductions. Employees who have already taken out TSP loans can suspend payments on them, however, for up to one year while on non-pay status. The payments would not be suspended automatically and employees would have to ask their agencies to send relevant information and forms to TSP.
Furloughed employees could receive some financial relief by withdrawing funds from their TSP accounts. The plan allows federal workers experiencing “financial hardship” -- meaning negative monthly cash flow or an extraordinary new expense, such as medical or legal bills -- to take money from their retirement account. The withdrawal must be at least $1,000 but is limited to the “amount of your financial need.” When employees make a financial hardship withdrawal, they are banned from contributing to their accounts -- and will also lose agency matching contributions -- for six months.
Employees applying for a hardship withdrawal do not need to provide any documentation, but must “certify, under penalty of perjury, [they] have a genuine financial hardship,” according to Kim Weaver, a TSP spokeswoman.
(Image via Kenishirotie/Shutterstock.com)
September 30, 2013