Officials at the federal government’s 401(k)-style retirement savings program reported Monday that they saw a steep increase in federal workers pulling money out of their Thrift Savings Plan accounts during the partial government shutdown.
At the monthly meeting of the Federal Retirement Thrift Investment Board, which administers the TSP, Tee Ramos, director of participant services, said that between Dec. 26 and Jan. 25, the issuance of TSP loans increased 5 percent over the same period last year. And hardship withdrawals, which allows participants to take out money early in exchange for a 10 percent tax penalty and a six-month suspension of payroll contributions, were up 26 percent.
TSP Spokeswoman Kim Weaver said Monday that the agency does not yet have an estimate of the dollar value of the money withdrawn from TSP funds during the shutdown, but she acknowledged that the increase represents a significant spike.
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Weaver said the agency has been active on Capitol Hill this month, working with lawmakers on several pieces of legislation that would make it easier for federal workers impacted by lapses in appropriations to access money in their TSP accounts.
Those bills include the Financial Relief for Feds Act (H.R. 545), which would allow furloughed federal employees and contractors with TSP accounts to make withdrawals without the 10 percent penalty.
“This bill would allow up to $4,000 withdrawals every 14 days, with repayment within three years,” Weaver said. “We have a couple of problems with this—not with the outcome, but with how we get there. We don’t know which participants are furloughed and we don’t know their salary, and we aren’t interested in multiple transactions because we don’t want to be treated as a checking account. We’ve pointed them to legislation that mimics the financial hardship withdrawal for natural disasters, and I believe, based on our conversation, that they’ll be amending it to address our concerns.”
The Emergency Relief for Federal Workers Act (S. 204), which was introduced last week by Sen. Tim Kaine, D-Va., and has 30 cosponsors, would allow tax-free hardship withdrawals up to $30,000 if a shutdown lasts more than two weeks.
“Participants would be able to make multiple withdrawals as long as you stay under that $30,000 limit, and they would need to recontribute the money within 120 days,” Weaver said. “Staff has been very interested in any amendments to make this workable . . . We’re focused on making sure that anything that passes can be implemented quickly.”
Although the TSP is self-funded and not directly impacted by lapses in appropriations, officials said they are concerned that the potential for another partial government shutdown beginning Feb. 16 could affect their ability to implement the provisions of the TSP Modernization Act that make it easier for participants to manage their accounts.
“We now have two new risks that both have to do with the shutdown,” said Tanner Nohe, who is managing the implementation effort. “First, there’s the prospect of emergency legislation. If anything gets passed, that would have to happen before [these changes] go live, and that could affect what resources are available.”
And if the government shuts down again next month, the TSP could be prevented from issuing regulations on time.
“During the shutdown, the Federal Register was shut down, and if it went even further along, we wouldn’t have been able to submit our regulations for public comment,” Nohe said. “They will eventually drop, but that depends on what the next three weeks bring.”