[Code of Federal Regulations]
[Title 5, Volume 3]
[Revised as of January 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR1620.45]

[Page 223-224]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
         CHAPTER VI--FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
 
PART 1620_EXPANDED AND CONTINUING ELIGIBILITY--Table of Contents
 
  Subpart E_Uniformed Services Employment and Reemployment Rights Act 
                    (USERRA)_Covered Military Service
 
Sec. 1620.45  Suspending TSP loans, restoring post-employment withdrawals, and 

reversing taxable distributions.

    (a) Suspending TSP loans during nonpay status. If the TSP is 
notified that an employee entered into a nonpay status to perform 
military service, any outstanding TSP loan from a civilian TSP account 
will be suspended, that is, it will not be declared a taxable 
distribution while the employee is performing military service.
    (1) Interest will accrue on the loan balance during the period of 
suspension. When the employee returns to civilian pay status, the 
employing agency will resume deducting loan payments from the 
participant's basic pay and the TSP will reamortize the loan (which will 
include interest accrued during the period of military service). The 
maximum loan repayment term will be extended by the employee's period of 
military service. Consequently, when the employee returns to pay status, 
the TSP record keeper must receive documentation to show the beginning 
and ending dates of military service.
    (2) The TSP may close the loan account and declare it to be a 
taxable distribution if the TSP does not receive documentation that the 
employee entered into nonpay status. However, the taxable distribution 
can be reversed in accordance with paragraph (c) of this section.
    (b) Restoring post-employment withdrawals. An employee who separates 
from civilian service to perform military service and who receives an 
automatic cashout of his or her account may return to the TSP an amount 
equal to the amount of the payment. The employee must notify the TSP 
record keeper of his or her intent to return the withdrawn funds within 
90 days of the date the employee returns to civilian service or pay 
status; if the employee is eligible to return a withdrawal, the TSP 
record keeper will then inform the employee of the actions that must be 
taken to return the funds.
    (c) Reversing taxable distributions. An employee may request that a 
taxable loan distribution be reversed if the taxable distribution 
resulted from the employee's separation or placement in nonpay status to 
perform military service. The TSP will reverse the taxable distribution 
under the process described as follows:
    (1) An employee who received a post-employment withdrawal when he or 
she separated to perform military service can have a taxable 
distribution reversed only if the withdrawn amount is returned as 
described in paragraph (b) of this section;
    (2) A taxable loan distribution can be reversed either by 
reinstating the loan or by repaying it in full. The TSP loan can be 
reinstated only if the employee

[[Page 224]]

agrees to repay the loan within the maximum loan repayment term plus the 
length of military service, and if, after reinstatement of the loan, the 
employee will have no more than two outstanding loans, only one of which 
is a residential loan; and
    (3) The employee must notify the TSP record keeper of his or her 
intent to reverse a taxable loan distribution within 90 days of the date 
the employee returns to civilian service or pay status; if the employee 
is eligible to reverse a taxable loan distribution, the TSP record 
keeper will then inform the employee of the actions that must be taken 
to reverse the distribution.
    (d) Breakage. Employees will not receive breakage on amounts 
returned to their accounts under this section.

[67 FR 49526, July 30, 2002, as amended at 70 FR 32213, June 1, 2005]