Federal Employees News Digest

Federal Benefits Q&A

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Question: "Several years ago I took a general purpose loan from Thrift Savings Plan. I will be retiring in a few months and there will remain approximately one year left on the loan. I understand that at retirement the current TSP balance at that time will remain, and as the loan has already been deducted, there will be no future payments. Will the unpaid balance of the loan that is being absorbed into the current TSP balance be treated as a taxable distribution?"

Answer: You will have up to 90 days following your retirement date to pay off your TSP loan. If after 90 days there is any balance left on the loan, the unpaid balance will be considered a distribution. You will then have to pay tax on the unpaid balance.

 

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