[Code of Federal Regulations]
[Title 5, Volume 3]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR1650.31]

[Page 269-270]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
         CHAPTER VI--FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
 
PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS PLAN--Table of Contents
 
                    Subpart D--In-Service Withdrawals
 
Sec. 1650.31  Financial hardship withdrawals.

    (a) A participant who has not separated from Government employment 
and who demonstrates financial hardship is eligible to withdraw all or a 
portion of his or her own contributions to the TSP and their 
attributable earnings in a single payment to meet certain specified 
financial obligations. The amount of a financial hardship in-service 
withdrawal request must be at least $1,000. A participant will 
demonstrate financial hardship if he or she meets one or both of the 
following tests:
    (1) The participant's monthly cash flow is negative, i.e., net 
income is less than ordinary monthly household expenses based on TSP 
calculations; and/or
    (2) The participant has incurred or will incur within the next six 
months an extraordinary expense which he or

[[Page 270]]

she has not paid, for which there has not been and will not be 
reimbursement (as defined in Sec. 1650.1), and which cannot be met by 
his or her monthly cash flow over a period of six months. Extraordinary 
expenses are limited to the following four types:
    (i) Medical expenses payable by the participant and related to the 
treatment of the participant, the participant's spouse, or the 
participant's dependents. Generally, eligible expenses are those that 
would be eligible for deduction for Federal income tax purposes, but 
without regard to the Internal Revenue Service's (IRS) income 
limitations on deductions. However, the following IRS allowable expenses 
are excluded from TSP unreimbursed medical expenses: health insurance 
premiums and expenses associated with household improvements required as 
a result of a medical condition, illness, or injury to the participant, 
the participant's spouse, or the participant's dependents. These items 
are already taken into account elsewhere in the financial hardship 
determination;
    (ii) The cost of household improvements required as a result of a 
medical condition, illness or injury to the participant, the 
participant's spouse, or the participant's dependents, which is eligible 
for deduction as a medical expense for Federal income tax purposes, but 
without regard to the IRS income limitations on deductions or the fair 
market value of the property. Household improvements are changes to the 
participant's living quarters or the installation of special equipment 
that is necessary to accommodate the circumstances of the incapacitated 
person;
    (iii) The cost of repairs or replacement resulting from casualty 
loss that would be eligible for deduction for Federal income tax 
purposes, but without regard to the IRS income limitations on 
deductions, fair market value of the property, or number of events. This 
is sudden property loss resulting from damage or destruction by fire, 
storm, or other casualty, or due to theft of property; and
    (iv) Legal costs, which are defined as attorney fees and court 
costs, associated with separation or divorce. Unpaid legal costs do not 
include alimony or child support payments or settlements a participant 
must pay a spouse or former spouse.
    (b) The amount of a participant's financial hardship withdrawal 
cannot exceed the smallest of the following:
    (1) The amount requested;
    (2) The amount in the participant's account that is equal to his or 
her own contributions and attributable earnings; or
    (3) The gross amount which would, subject to a request made under 
Sec. 1650.42(b), result in a net disbursement to the participant (after 
the mandatory Federal income tax with holding) of enough funds to both:
    (i) Make up the participant's negative cash flow for a period of six 
months in the case of a financial hardship withdrawal based on ordinary 
monthly household expenses; and
    (ii) Pay the extraordinary expense upon which the participant's 
financial hardship withdrawal is based. If the participant has a 
negative cash flow, the amount of the net disbursement based on 
extraordinary expense is equal to the amount of the extraordinary 
expense. If there is a positive cash flow, the amount is equal to the 
amount of the expense minus six times the amount of the calculated 
monthly positive cash flow.