TSP Tips
By John "SystemTrader" Pope
 
05/13/06
TSP Loans: Requirements
 
Welcome to the first installment of “TSP Tips.” During the next few weeks, we're going to take a look a the TSP Loan Program. We'll cover topics such as interest rates, estimating loan payments and the mechanics of how you receive your loan. For today, however, we'll limit our discussion to the requirements for a TSP loan.
 
Before you even consider a TSP loan, please note the following terms and conditions:
  1. Federal employee in pay status. You must be a current uniformed service or Federal civil service employee. Along the same lines, you can only make your loan payments through payroll deductions. So you need a routine paycheck from the U.S. government to qualify.
  2. At least 1 grand. You must have at least $1,000 of your own contributions and earnings from these contributions in your account. So if you've contributed $950 and made another $100 with your savvy TSPTalk.com market timing skills, you're eligible. (In technical terms, you have $1,050 of contributions and accumulated earnings on your contributions.)
  3. Agency contributions don't count. While it's nice to get agency contributions toward your TSP, these won't count towards your minimum $1,000 account size. Furthermore, accumulated earnings made on agency contributions don't count either.
  4. There's always a catch (or at least a fee). There's a $50 fee for each loan you take. This is used to cover administrative costs.
  5. Spousal consent. You decide to get a TSP loan to buy a new motorcycle. When your wife/husband asks how you paid for it, you plan to say it's a gift from Uncle Fred's secret offshore trust account. Sorry, but this won't fly. FERS participants must have their spouse's consent before getting the loan. Similarly, the TSP must notify spouses of CSRS participants before the loan is disbursed. These FERS/CSRS conditions apply even if you and your spouse are separated. Oh well, so much for that brilliant(?) plan...
  6. Loan limits. You can have one general purpose loan and one residential loan for your TSP account at any given time. (We'll cover these loan types in another tip.) Once you've paid off a loan, you have to wait at least 60 days before getting another loan of the same type. The minimum loan amount is $1,000 and the maximum is $50,000. However, the maximum amount is subject to other factors such as total contributions to your account, other outstanding TSP loans and restrictions based on the Internal Revenue Code.
That's all for now. Have a great week and we'll see you again next weekend for another tip!

John "SystemTrader" Pope