The TSP has finalized rules it proposed earlier this year making certain expenses related to a natural disaster automatically eligible for in-service “financial hardship” withdrawals.

Traditionally, such withdrawals commonly have been allowed after the IRS issues a policy statement in the wake of a disaster such as a flood or hurricane. However, that agency has decided to no longer make such announcements and instead added natural disasters to a list of situations in which withdrawals are allowed under the so-called “safe harbor” rule.


The TSP’s new policy makes eligible for financial hardship withdrawals any expenses and losses, including loss of income, resulting from a natural disaster declared by the Federal Emergency Management Agency.

In finalizing the rules, the TSP clarified that the policy “does not limit the expense to a specific type, such as property expenses or medical expenses” so long as it was incurred by someone living in a designated area. That would include, for example, funeral expenses for a dependent or spouse who died as a result of the disaster.

The TSP meanwhile said that under the rules a pandemic does not qualify as a natural disaster, adding that special hardship withdrawal policies already are in effect due to the Coronavirus pandemic.

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