The board that oversees the Thrift Savings Plan issued a final rule Wednesday in the Federal Register amending a reamortization rule for loans made from the 401(k)-style retirement plan.
The Federal Retirement Thrift Investment Board’s final rule combines the accrued interest of a loan made out of the TSP with its outstanding principal, allowing the federal employee to repay both figures if they have been allowed to recalculate, or reamortize, their payment schedule.
Any active TSP participant that takes a loan out of their retirement plan account must start repayments with interest within 60 days of the loan’s disbursement. Those repayments can be deducted from their paycheck.
But under certain circumstances, such as a federal employee shifting payroll systems from biweekly to monthly payments or returning from non-pay status like military service or extended family leave, they would be allowed to reamortize their TSP loan.
Previously, the reamortization rule required that the employee first pay any accrued interest prior to outstanding loan principal or current interest, but Wednesday’s final rule combines the accrued interest and loan principal into a single figure repaid directly to the participant’s account.
