Feds Won’t be Able To Escape Their TSP Debt, Even By Leaving Government

The agency that runs the retirement plan will be able to garnish up to 15 percent of former feds’ private sector wages to collect debt.

The agency that runs the Thrift Savings Plan will soon have the authority to collect its debts even after a delinquent federal employee leaves public service for private-sector employment.

A final rule issued by the Federal Retirement Thrift Investment Board will allow the agency -- starting May 27 -- to require private-sector employers to deduct up to 15 percent of an employee’s paycheck to pay back debts owed to the agency. The wage garnishment can continue until the debt is paid back in full.

The rule, which actually codifies a law passed in 1996, requires FRTIB to provide the employee 30 days’ notice before arranging for paycheck deductions. The employee is entitled to then set up a payment plan or call for a hearing to challenge the debt.

When employees are fired from federal service, FRTIB must wait until they maintain a job for 12 consecutive months before garnishing wages. The rule prohibits the employees’ new bosses from taking any disciplinary action against their worker for having the debt.

The rule does not apply to debt from employees who have taken out loans against their TSP accounts. Rather, it applies to debt from over-payments that TSP accidentally gave participants. 

The rule will not be subject to public comment, as regulations typically are, as it parallels the authority given to other agencies. 

CORRECTION: This rule will not affect TSP loans. Instead, the plan's governing agency can garnish wages for accidental overpayments.

(Image via Andrey_Popov/