Medical personnel help residents sign in for a COVID-19 test at the Bethany Baptist Church on Wednesday in the Bedford-Stuyvesant neighborhood of the Brooklyn borough of New York. Mary Altaffer / AP
TSP Highlights COVID-19 Withdrawal Options, and More
A weekly roundup of pay and benefits news.
Officials at the federal government’s 401(k)-style retirement savings program on Wednesday provided participants with an update on how they can access money from their accounts if they have been impacted by the coronavirus pandemic.
Although the $2.5 trillion stimulus package signed into law in March creates special rules for many Thrift Savings Plan withdrawals, the agency has not yet finished implementation of these tools. But officials said in a release on the TSP website that participants can take advantage of many of the provisions of the stimulus law using existing withdrawal methods.
“If you’re a current civilian federal employee or member of the uniformed services and eligible under the existing rules, such withdrawals include hardship withdrawals and age-based in-service '59 1/2' withdrawals,” they wrote. “If you’re separated from federal service or a beneficiary participant, they include single payments and some installment payments.”
If participants or their spouses or dependents have been diagnosed with either SARS-CoV 2 or COVID-19, or if they are experiencing “adverse financial consequences” as a result of stay at home orders, furloughs, layoffs or reduced work hours related to the pendemic, they qualify for coronavirus-related distributions.
If participants meet the criteria and they designate an existing withdrawal option as coronavirus-related, the Internal Revenue Service will waive the 10% tax penalty for early withdrawals.
Additionally, the taxable income from these withdrawals may be repaid “ratably” over a three-year period. And if participants repay the amount of the withdrawal into an eligible retirement plan within three years, they can avoid paying federal income tax on the transaction altogether.
“If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct plan-to-plan transfer so that you do not owe federal income tax on the distribution,” officials said.
TSP officials stressed that in order to ensure that a withdrawal is granted this favorable treatment, participants must designate the withdrawal as coronavirus-related when they file their taxes via a forthcoming Form 8915-E document. The cap on coronavirus-related withdrawals across all retirement accounts is $100,000.
An additional temporary option that will waive traditional in-service withdrawal requirements and waive tax withholding remains in the works, and TSP officials said they would provide more details “soon.”
On Capitol Hill, House Speaker Nancy Pelosi on Tuesday unveiled a sweeping $3 trillion coronavirus response bill, which includes a number of provisions that would affect federal employees’ pay and benefits.
The bill authorizes hazard pay for all federal employees who cannot telework and whose work involves interaction with the public to the tune of an additional $13 per hour, up to $10,000 over the course of the pandemic. For employees making at least $200,000 per year, the cap would be $5,000 in hazard pay, although in all cases an employee’s aggregate pay cannot exceed the traditional annual cap.
The legislation also creates a presumption of workplace causation for coronavirus diagnoses for employees whose duties require “substantial contact” with the public, making it easier for federal workers who contract COVID-19 to receive workers compensation benefits. It also would block the Office of Management and Budget from exempting employees from two newly enacted emergency paid sick leave programs, and it would ensure that employees of the Veterans Affairs Department and Transportation Security Administration are eligible for those benefits.
The bill strengthens language intended to ensure that all eligible federal employees can telework for the duration of the coronavirus pandemic, and it mandates that agencies extend the maximum telework posture to federal contractors. And it would codify that federal workers, veterans and military service members are not forced to pay any out-of-pocket costs for coronavirus treatment through TRICARE, VA health plans, or the Federal Employees Health Benefits Program.