October 2010

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Forms and correspondence (other than loan 

payments) should be mailed to:

Thrift Savings Plan 

P.O. Box 385021 

Birmingham, AL 35238

Or faxed to:

1-866-817-5023
i

Table of Contents

Things to Consider Before You Borrow . . . . . . . . . . . . . . . . . 1

Rules for Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Applying for a Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Repaying a Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

APPENDIX I

How Nonpay Status Affects Your TSP Loan . . . . . . . . . 12

APPENDIX II

Checklist for Making Loan Payments . . . . . . . . . . . . . . 14
- 1 -

Things to Consider 

Before You Borrow

The Thrift Savings Plan was designed to provide you with income after

you retire. The amount you will have in your account depends on the

decisions you make — how much you contribute, how you invest, and

whether you take money out of your account before retirement.

The TSP loan program is an important benefit that allows participants

access to the money in their accounts. However, taking a loan could

result in less money for you at retirement. So, before you borrow from

your account, consider the following:

•	 If your TSP investments earn higher rates of return than the interest rate on the loan, the loan interest you pay will not be equal to

the earnings you would have received if the money had remained

in your account. This means that your TSP account will be smaller

than it would have been if you had not borrowed from it.

•	 If you are not able to contribute as much to the TSP because of

the financial burden of your loan payments, your TSP account will

not grow as quickly. If you are a FERS employee and you have to

reduce your contribution rate to below 5%, you will also give up

Agency Matching Contributions.

•	 A TSP residential loan is not a mortgage. Therefore, the TSP loan

interest payments are not tax deductible, as they might be for a

mortgage or home equity loan.

Before you take a TSP loan, make sure you realize its potential effect

on your retirement income and decide whether it makes more sense to

borrow from another source.
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Rules for Borrowing

You can borrow from your account if:

•	 You have at least $1,000 of your own contributions and associated earnings in your account. Agency contributions (and earnings on that money) cannot be borrowed.

•	 You are currently employed as a Federal civilian employee or

member of the uniformed services. (Separated and retired TSP

participants are not eligible.)

•	 You are in pay status. (Loan payments are deducted from your

pay.)

•	 You have not repaid a TSP loan (of the same type) in full within

the past 60 days.

•	 You have not had a taxable distribution on a loan within the past

12 months, unless the taxable distribution resulted from your

separation from Federal service.

You can borrow from your TSP account even if you have stopped contributing your own money.

If you have both a civilian account and a 

uniformed services account, the eligibility 

requirements apply to the account from 

which you intend to borrow. 

There are two types of loans:

•	 General purpose loan with a repayment period of 1 to 5 years.

No documentation is required.

•	 Residential loan with a repayment period of 1 to 15 years. Documentation is required.

•	 A residential loan can be used only for the purchase or construction of a primary residence. The residence can be a house, condominium, shares in a cooperative housing corporation, or a townhouse, boat, mobile home, or recreational vehicle, but it must be

used as your primary residence. The residence must be purchased

(in whole or in part) by you. You can obtain a residential loan for

constructing a new residence or purchasing an existing residence,
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but not for refinancing or prepaying an existing mortgage, for

renovations, for buying out another person’s share in your current

residence, or for the purchase of land only.

You may have only one general purpose loan and one residential 

loan at any one time.

Minimum loan amount. The smallest amount you can borrow is $1,000.

Maximum loan amount. TSP and Internal Revenue Service (IRS) rules

limit the amount you can borrow. The principal amount cannot exceed

the smallest of the following:

(1) your contributions and their earnings in your civilian or uniformed services account (that is, the account from which you

are taking the loan), not including any outstanding loan balance

(the Contributions and Earnings Test);

(2) 50 percent of your total vested account balance (including any

outstanding loan balance) or $10,000, whichever is greater, minus any outstanding loan balance (the IRS Vested Balance Test);

or

(3) $50,000 minus your highest outstanding loan balance, if any,

during the last 12 months (the IRS $50,000 Test).

If you have a civilian and a uniformed services account, the

combined account balances and loan balances will be used

to calculate Items 2 and 3.

Your account balance is recalculated at the end of each business day

based on the daily share prices. Therefore, your maximum loan amount

may also change each day.

When you borrow from your TSP account, your account balance is 

decreased by the amount of your loan. If your loan account is invested

in more than one fund, your loan is deducted on a proportional basis

from the employee contributions (and earnings on those contributions)

that you have in each fund.

When you repay your loan, your payments are invested in your TSP 

account according to your most recent contribution allocation. 
- 4 -

The loan interest rate you pay for the life of the loan is the G Fund rate

at the time your application is processed.

You must be in pay status to get a TSP loan because you must repay

your loan with payroll deductions. Therefore, if you are not currently receiving pay, you will not be eligible for a TSP loan. The TSP refers to this

status as “nonpay.” (See Appendix I.)

•	 For civilian TSP participants, nonpay status includes leave without

pay and furlough.

•	 Most uniformed services members will never be in nonpay status.

However, if you are a member of the Ready Reserve and your drilling intervals are irregular (that is, other than monthly) and therefore you do not receive pay each month, you are considered, for

TSP purposes, to be in nonpay status during the months you do

not drill. When you return to pay status, you may apply for a TSP

loan.

By law, your spouse has certain rights to your TSP account. Therefore, when you request a loan, you must indicate whether you are married, even if you are separated from your spouse. If you are married, the

following rules apply:

•	 If you are a FERS participant or a member of the uniformed services, your spouse must consent to your TSP loan by signing the

Loan Agreement that the TSP will send you (or that you print from

the TSP website, if you request a loan online).

•	 If you are a CSRS participant, the TSP must notify your spouse

when you apply for a loan.

Exceptions may be approved under certain very limited circumstances.

For more information, refer to the Exception to Spousal Requirements

form, which is available from the TSP website, or from your agency or

service.

The TSP will pursue, and refer to the Department of Justice for prosecution, any person who attempts to deprive a

spouse of his or her TSP rights by forging the spouse’s signature, by lying about the participant’s marital status, or by

similar fraudulent actions.
- 5 -

If you have a court order against your account, you will not be able 

to get a loan. The TSP must honor certain orders, such as those that

enforce payment of child support or alimony, or that award a portion of

your account to a former spouse. When the TSP receives a court order,

a hold is placed on your account. You cannot get a loan until the court

order has been satisfied.

For more information about court orders, 

read the booklet Court Orders and 

Powers of Attorney, available from 

the TSP website, your agency or service, 

or the TSP.
- 6 -

Applying for a Loan

You can make your request in one of two ways:

•	 Electronic Request—TSP website, www.tsp.gov

The website is the most efficient way to request a loan. Log into

the secure My Account section using your 13-digit TSP account

number (or customized user ID) and your TSP Web password.

Depending upon your retirement system coverage (FERS, CSRS,

or uniformed services), marital status, and type of loan, you will

either be able to complete the process online, or you will be instructed to print out the partially completed Loan Agreement,

complete the form, and mail it to the TSP (with any additional

required information) before the expiration date at the top of the

agreement.

•	 Paper Request—Loan Application Form

Send your completed Loan Application to the TSP at the address

on the form. Loan Applications are available from the Forms &

Publications section of the TSP website, or from your agency or

service. The TSP will then send you a Loan Agreement with the

terms of the loan. Complete the form, and return it to the TSP

(with any additional required information) before the expiration

date at the top of the agreement.

If you are requesting a residential loan, you must also complete and submit the Residential Loan Documentation form to document the costs associated with the purchase or construction of a primary residence.

If you do not return all of the required 

documents by the expiration date, you 

will have to reapply.

The TSP will deduct a $50 fee from the proceeds of the loan to 

cover administrative costs. Therefore, your loan amount will be reduced by the amount of the fee. For example, if you requested a loan

for $1,000, the TSP will deduct the $50 fee, and the amount paid to you

will be $950.
- 7 -

You can request that your loan be sent directly to your financial institution by electronic funds transfer (EFT). EFT is a safer method of

payment than issuing a check. Please verify the routing number of your

financial institution and your account number before you submit this

information to the TSP. EFT payments can be made only to financial

institutions in the United States. Note: If you request an EFT, your loan

cannot be completed online.

If you do not request EFT, your loan will be paid to you by check. It will

be mailed to the address in your TSP account record.

If your address is not correct, contact 

your agency or service to have your 

correct address submitted to the TSP 

before you apply for a loan.

Lost, stolen, damaged, or misdirected checks can take 6 weeks or longer to replace.

If you make your loan request on the TSP website AND you are able to

complete the process online, your loan will generally be disbursed from

the TSP within 3 business days and mailed to you. It will take an additional 5 to 10 days to receive the check.

If you complete a paper Loan Agreement, it may take several weeks from

the time the TSP record keeper receives your completed Loan Agreement until your loan is processed and you or your financial institution

receives your loan.

Your loan may be less than the amount shown on your Loan Agreement. This can occur if the value of your account has declined. However, as long as the amount you can borrow is at least $1,000, you will

still receive your loan in the smaller amount. If this occurs, the repayment period will be the same, but your loan payment amount will be

reduced.

You will receive a written confirmation of the loan disbursement, which

will show the correct payment amount.
- 8 -

Repaying a Loan

Loan payments are made through payroll deductions. When your

loan is disbursed, the TSP will notify your payroll office immediately to

begin deducting loan payments from your salary each pay period.

Check your earnings and leave statement

to be sure that loan payments have 

started and that they are in the correct 

amount. 

The TSP will report your loan transactions on your quarterly participant statement, and report an annual loan summary on your annual

participant statement. Review your statements carefully and report any

discrepancies to your agency or service.

You cannot suspend your loan payments. When you agree to the loan

terms, you agree to repay the loan in full and you authorize payroll deductions. (If you are in nonpay status, please see Appendix I.)

If you are experiencing financial difficulties, 

you may be able to reamortize your loan 

to reduce the amount of each payment, 

but you cannot stop the payments. 

Missed loan payments? At the end of each calendar quarter, the TSP

will identify any loan account with missing payments. If your loan is

identified, the TSP will send a notice to you indicating that you have

until the end of the following calendar quarter to pay the missing

amount.

You are responsible for ensuring that correct loan payments are 

submitted on time. It does not matter whether your agency or service

was responsible for the missed loan payment. You must pay the missed 

amount directly to the TSP using your own personal funds in order to avoid a

taxable distribution. Your payroll office cannot make up missed payments from your paycheck.
- 9 -

A taxable distribution will be declared on the unpaid balance (including any accrued interest) if you do not make up the missing amount.

This means that the IRS will consider the unpaid balance of your loan

to be taxable income. In addition, if you are under age 591⁄2, you may

have to pay a 10 percent early withdrawal penalty tax. Once a taxable

distribution has been declared, the loan is closed and you will not be

allowed to repay it.

If your loan came from your uniformed services account and

your account included tax-exempt contributions from pay

earned while serving in a combat zone, you will not have to

pay taxes on that portion of the distribution.

Consult the IRS or a tax advisor for 

information and advice if your loan is 

declared a taxable distribution.

A taxable distribution permanently reduces your TSP account. If the

TSP declares a taxable distribution of your loan, your final account balance 

at retirement will be less than it otherwise would have been.

A taxable distribution will affect your eligibility for another loan. 

You cannot apply for another loan from that account within 12 months

of the date of the distribution (unless the distribution was due to

separation).

If the taxable loan distribution was declared because you separated from Federal service, you may roll over (within 60 days) any or

all of the taxable amount into a traditional IRA or an eligible employer

plan using your personal funds. You thereby avoid taxes and penalties

on that amount. Members of the uniformed services can also roll over

tax-exempt amounts to an IRA, if the IRA will accept them.

The TSP will send you the appropriate 

tax form by January 31 of the year after 

the distribution.
- 10 -

You can reamortize your loan at any time to change your payment

amount or to shorten or lengthen your term, so long as you do not

exceed the 5-year maximum term for a general purpose loan or the

15-year maximum term for a residential loan. There are no restrictions

on the number of reamortizations that you can have during the life of a

loan. You can reamortize your loan on the TSP website or by calling the

TSP.

If you change agencies or payroll offices— for example, when you

transfer from one civilian agency to another, from one component of

the uniformed services to another, or from active status to Ready Reserve status — you must inform your new agency or service that you

have a TSP loan and instruct it to continue your TSP loan payments. If

you transfer to an agency that has a different pay cycle from your current

agency, you should reamortize your loan to avoid being in default.

Members of the Ready Reserve whose drilling intervals

are irregular (that is, other than monthly) and civilians with 

intermittent pay schedules should consult with their agencies or services before taking a loan from their TSP accounts

so that they don’t suffer taxable distributions due to missed

payments. See Appendix I, How Nonpay Status Affects Your

TSP Loan.

You can make additional loan payments to restore your account more

quickly or to make up for missed payments. Payments can be made by

personal check or money order. Make checks or money orders payable

to the Thrift Savings Plan and include your loan number on the checks

or money orders. You will receive a notice confirming your payment.

Please allow up to 2 weeks for processing.

You can also prepay your loan in full at any time without a prepayment penalty. The TSP website or the ThriftLine can provide you with

the prepayment amount, which includes all unpaid principal and any

unpaid interest.

The TSP will notify you and your payroll office when your loan has been

paid in full. If payments continue, contact your payroll office immediately.
- 11 -

Send your payment with a Loan 

Payment Coupon, which can be 

downloaded from the TSP website. 

Be sure to provide your complete 

TSP account number on the coupon 

to help us identify your account. 

If you leave Federal service, your loan must be closed in one of the

following ways within approximately 90 days of when your agency or

service reports your separation to the TSP:

•	 Prepay your loan in full;

•	 Partially prepay your loan, and receive a taxable distribution on

the reduced outstanding balance; or

•	 Receive a taxable distribution of the entire outstanding loan

balance.

Note: A withdrawal cannot be processed from your account until your

loan has been closed.

When your agency or service reports your separation, you will be sent

a notice with instructions. If the TSP does not receive payment in full

by the required date shown on the notice, a taxable distribution will be

declared.

If a taxable distribution is declared on any portion of the outstanding

loan amount because of your separation from Federal service, you may

be subject to the IRS 10% early withdrawal penalty tax, unless you separate from Federal service in the calendar year you are age 55 or older.

In the event of your death, the outstanding loan balance plus any unpaid interest is reported as a taxable distribution to your estate. Your

loan cannot be repaid. The distribution is not subject to an early withdrawal penalty tax.

If you are a civilian employee who separated to perform 

military service and a taxable distribution was declared for

the loan from your civilian account, you may be eligible to

reverse the distribution when you return to Federal civilian

service. Contact the TSP to determine your eligibility.
- 12 -

Appendix I

How Nonpay Status Affects Your TSP Loan

If you go into approved nonpay status, loan payments can be suspended

for the nonpay period, but only up to one year due to Internal Revenue

Service (IRS) requirements. Interest will accrue while your payments are

suspended.

When you return to pay status, your loan payments made by payroll

deductions must resume. Your loan will be reamortized automatically

when your agency or service informs the TSP that you have returned to

pay status.

If your nonpay period exceeds one year, you must make payments from

your personal funds to avoid being in default. This one-year limit does

not apply if the nonpay status is due to military leave.

Your reamortized loan payments must repay your loan by the maximum

time allowed. If your current loan payment amount will repay your loan

within this time period, your loan payment amount will not be changed.

However, if your current loan payment amount will not repay the reamortized loan in full within this time period, your loan payment amount

will be increased.

A special rule applies if you enter nonpay status to perform military

service. In that case, you will be permitted to suspend payments on

your loan until you return to pay status, even if this is longer than one

year. (You cannot repay your civilian TSP loan by making loan deductions from your uniformed services pay.) If the nonpay documentation

submitted to the TSP does not specify that you are in nonpay status to

perform military service, the suspension of your loan payments cannot

exceed the one-year period described above. (See the Fact Sheet “Effect

of Nonpay Status on TSP Participation,” available from the TSP website

or from your agency or service.)

If your agency reports you as separated from civilian service to perform

military service, you will be required to repay your loan in full within 90

days. If it is not, the outstanding loan balance and any unpaid interest

will be reported to the IRS as a taxable distribution. (However, you may
- 13 -

be eligible to have your loan reinstated when you return to Federal civilian service. Contact the TSP.)

When you begin your period of nonpay status, you must submit documentation to the TSP. If applicable, please indicate whether your nonpay

status is due to military service. Documentation consists of:

❑ Form TSP-41 (for civilians) or Form TSP-U-41 (for uniformed services members), Notification to TSP of Nonpay Status; or

❑ Form SF-50, Notification of Personnel Action; or

❑ A letter on agency or service letterhead, signed by an appropriate

agency official, or your commander or adjutant, and containing

your name, date of birth, and Social Security number; the beginning date of the nonpay status; and the signature and title of the

agency or service representative providing the information.

When you return from nonpay status, you must notify the TSP of your

date of return. You can use any type of documentation described above.

Note to members of the Ready Reserve: If you have a loan

from your civilian account and you are called to active military

duty, you may elect to reduce the interest rate on your TSP

loan to 6 percent for the period of your military duty, subject

to the Service Members Civil Relief Act (50 U.S.C. App. § 501).

Write or call the TSP for more information.

If you are on approved leave without pay to work full time for an employee organization under which your TSP contributions may continue,

or if you are on an Intergovernmental Personnel Act (IPA) assignment,

you are eligible to apply for a TSP loan. If you already have a loan when

you begin your period of approved leave without pay, your loan payments must continue. Contact the TSP for instructions.

If you are in nonpay status (either as a civilian or as a member of the

uniformed services) and want to continue making payments, you can

do so by sending a personal check or money order to the TSP. Use the

Loan Payment Coupon when you send in your payments. (See Appendix II or the TSP website.)

Any loan payments received by the TSP during the nonpay period will

be taken into account when the loan is reamortized.
- 14 -

Appendix II

Checklist for Making Loan Payments

✓ Obtain a Loan Payment Coupon from the TSP website (www.tsp.gov)

and print all information on the coupon, including your TSP account

number, to help us identify your account. Otherwise, your payment

will be returned to you.

✓ You may make your payment with a personal check, cashier’s

check, or money order made payable to the Thrift Savings Plan.

✓ Write your loan number on your check or money order. If you do

not know your loan number, check your account on the TSP website

(www.tsp.gov) or call the TSP ThriftLine, 1-TSP-YOU-FRST (1-877-

968-3778).

✓ Sign your check. Do not send cash.

✓ If you want to make payments for more than one loan, send a

separate check (or money order) and coupon for each loan.

✓ Do not send correspondence or other TSP forms with the coupon or

the processing of your check will be delayed.

✓ Mail the coupon and your check to:

Thrift Savings Plan 

P.O. Box 979004 

St. Louis, MO 63197-9000

Send overnight deliveries to: U.S. Bank, Box 9004, Government Lockbox SL-MO-C2GL, 1005 Convention Plaza, St. Louis, MO 63101
Sources of Loan Information

TSP Website, www.tsp.gov, offers:

• General information about the loan program

• Forms and publications

• Loan calculator to estimate loan payments and term

• Examples of documentation required for a residential loan

In the My Account section (using your TSP account number and 

Web password), you can:

• Learn the amount available for you to borrow

• Obtain the current loan interest rate

• Estimate the amount or term of your loan payments

• Start (and possibly complete) a loan request

• Check the status of your request

• Reamortize your loan

• Find out your outstanding loan balance

• Get prepayment information

TSP ThriftLine, 1-TSP-YOU-FRST* (1-877-968-3778)

Using your TSP account number and your TSP PIN to access your 

account, you can:

• Learn the amount available for you to borrow

• Obtain the current loan interest rate

• Check the status of your request

• Get prepayment information 

*Outside the U.S. and Canada, call 404-233-4400 (not toll free).
TSPBK04 (10/2010) 

 PREVIOUS EDITIONS OBSOLETE

Federal Retirement Thrift Investment Board

FPI-PET