In recent months, times have been trying for people all over the country. For federal employees, the coronavirus pandemic has brought severe financial problems. Thankfully, there is help, and we’ve listed some options below!
TSP and CARES Act
For those in the TSP, it’s easier than ever to access savings. Thanks to the CARES Act, help is available if you can prove financial loss as a direct result of the pandemic or show that you or a family member has received a positive COVID-19 diagnosis.
Typically, there’s a 10% penalty that comes with early withdrawals; plus, there’s always the worry of paying tax on these withdrawals. When taking a coronavirus-related withdrawal, this penalty is waived by the IRS.
Under the new guidelines, some TSP participants can get a 12-month window before repaying on TSP loans. Elsewhere, there could be opportunities to borrow above the standard 50% limit of TSP savings. Some have taken a $100,000 one-time withdrawal before the average age restrictions of 59 1/2; this doesn’t come with the standard hardship demonstration process.
After withdrawing, another benefit is the ability to reduce the tax burden by declaring the loan over three tax years. If you take $12,000, for example, you can declare $4,000 in 2020, $4,000 in 2021, and $4,000 in 2022.
If you take withdrawals or loans through the CARES Act, pay attention to the special conditions that come with it. Many routes to financial assistance have deadlines, so contact HR and work with your financial professional.
On the other hand, federal employees who have been affected by COVID-19 could be eligible for an FEEA loan. Whether you’ve been diagnosed yourself, have cared for a loved one with the virus, or have been forced away from work, you could receive up to $1,000 if you don’t have FFCRA, annual, advanced, or sick leave.
If a federal employee passes away, they have offered help to children and spouses with bridge grants. If you think you might be eligible, we highly recommend heading over to their website. Even if you don’t get financial help, there are all sorts of useful guides and links to be found on the various pages. They’re also offering face masks to those in regular contact with the public or working with other employees nearby.
It’s a tough time for everybody, so it’s good to know that federal employees are getting their fair share of the help. Whether you choose to contact FEEA or utilize the CARES Act to take advantage of your TSP, there are options to help with this short-term problem. With the TSP withdrawals, pay them back within three years, and you won’t be affecting your long-term financial health.