CARES Act Withdrawal Deadline for TSP Rapidly Approaching

An important deadline that can impact TSP participants is quickly approaching.

Federal employees who were thinking of taking funds from their Thrift Savings Plan accounts under the provisions of the CARES Act will have to decide quickly.

The TSP announced today that the deadline for making a withdrawal under the terms of the CARES Act is December 15, 2020. “If you are eligible and plan to make this type of withdrawal, we must receive your completed application on or before December 15, 2020. We cannot accept any applications received after 11:59 PM that day,” the TSP said in a statement.

The CARES Act and TSP Withdrawals

The CARES Act contains a provision allowing an early withdrawal from a retirement plan without the usual 10% penalty to eligible individuals impacted by COVID-19. The TSP announced in May it would offer this as an option to TSP participants.

In order to qualify, the TSP says that federal employees would have to meet at least one of these criteria:

  • You are or have been diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act).
  • Your spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is or has been diagnosed with such virus or disease by such a test.
  • Due to COVID-19, you are experiencing adverse financial consequences as a result of you, your spouse, or a member of your household
    • being quarantined;
    • being furloughed or laid off or having work hours reduced;
    • being unable to work due to lack of child care;
    • having to close or reduce hours of a business;
    • having a reduction in pay or self-employment income; or
    • having a job offer rescinded or a start date for a job delayed.

Although the penalty is waived, taxes will still be owed on the withdrawal. The TSP says that it is eligible for favorable tax treatment as described on its website.

Is This a Good Idea?

It probably depends on one’s situation.

Financial advisors generally recommend against taking money out of retirement accounts for anything besides retirement unless it is absolutely necessary. That money is there to provide for your needs in retirement after all. As FedSmith author John Grobe said when he offered some advice on the subject, “Honey, don’t hit your TSP unless it’s the last resort.

Ultimately, it’s a question you would want to discuss with your financial and tax advisors before proceeding to fully understand the implications for your situation.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.