[Code of Federal Regulations]
[Title 5, Volume 3]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR1655.15]

[Page 290-291]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
         CHAPTER VI--FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
 
PART 1655_LOAN PROGRAM--Table of Contents
 
Sec.  1655.15  Taxable distributions.

    (a) The Board may declare any unpaid loan principal, plus unpaid 
interest, to be a taxable distribution from the Plan if:
    (1) A participant is in a confirmed nonpay status for a period of 
one year or more, has not advised the TSP that he or she is serving on 
active military duty, and payments are not resumed after the participant 
is notified the loan has been reamortized;
    (2) A participant separates from Government service and does not 
repay the outstanding loan principal and interest in full within the 
period specified by the notice to the participant from the TSP record 
keeper explaining the participant's repayment options;
    (3) The TSP record keeper advises the participant that there are 
missing payments and the participant fails to make (by personal check or 
guaranteed funds) a direct payment of the entire missing amount or 
repayment in full by the deadline established in accordance with Sec.  
1655.14(e);
    (4) Any material information provided in accordance with Sec.  
1655.10, Sec.  1655.12, or Sec.  1655.18 is found to be false;
    (5) With the exception of a loan described in 5 CFR 1620.45, the 
loan is not repaid in full (including interest due) within five years, 
in the case of a general purpose loan, or within 15 years, in the case 
of a residential loan, from the loan issue date;
    (6) The participant dies; or
    (7) The participant's loan payments were stopped when he or she 
became a debtor in a chapter 13 bankruptcy action, and the bankruptcy 
court did not expressly permit the payments to recommence.
    (b) If a taxable distribution occurs in accordance with paragraph 
(a) of this section, the Board will notify the participant of the amount 
and date of the distribution. The Board will report the distribution to 
the Internal Revenue Service as income for the year in which it occurs. 
That portion of a loan that represents a uniformed services 
participant's contributions from pay subject to the combat zone tax 
exclusion will not be included in this calculation.
    (c) If a participant dies and a taxable distribution occurs in 
accordance with paragraph (a) of this section, the Board will notify the 
participant's estate of the amount and date of the distribution. Neither 
the estate nor any other person, including a beneficiary, may repay the 
loan of a deceased participant, nor can the funds be returned to the 
TSP.
    (d) If, because of Board or TSP record keeper error, a TSP loan is 
declared a taxable distribution under circumstances that make such a 
declaration inconsistent with this part, or inconsistent with other 
procedures established by the Board or TSP record keeper in connection 
with the TSP loan program, the taxable distribution will be reversed. 
The participant will

[[Page 291]]

be provided an opportunity to reinstate loan payments or repay in full 
the outstanding balance on the loan.

[68 FR 35515, June 13, 2003, as amended at 68 FR 74451, Dec. 23, 2003]