Rule2025-23253
Curing Missed Loan Payments
Primary source
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Published
December 18, 2025
Effective
December 18, 2025
Issuing agencies
Federal Retirement Thrift Investment Board
Abstract
The Federal Retirement Thrift Investment Board (FRTIB) amends its regulations regarding the methods available to participants to cure missed loan payments. This final rule will permit resumed payroll deductions for TSP loans to automatically apply to missed payments, giving participants more flexibility to cure missed payments.
Full Text
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<title>Federal Register, Volume 90 Issue 241 (Thursday, December 18, 2025)</title>
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[Federal Register Volume 90, Number 241 (Thursday, December 18, 2025)]
[Rules and Regulations]
[Pages 59042-59043]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23253]
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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1655
RIN 322-AA01
Curing Missed Loan Payments
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
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SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB) amends
its regulations regarding the methods available to participants to cure
missed loan payments. This final rule will permit resumed payroll
deductions for TSP loans to automatically apply to missed payments,
giving participants more flexibility to cure missed payments.
DATES: The effective date is December 18, 2025.
FOR FURTHER INFORMATION CONTACT: For press inquiries: James Kaplan at
(202) 809-2625. For information about this final rule: Elizabeth Harris
at (202) 942-1600.
SUPPLEMENTARY INFORMATION: The FRTIB administers the TSP, which was
established by the Federal Employees' Retirement System Act of 1986
(FERSA), Public Law 99-335, 100 Stat. 514. The TSP is a retirement
savings plan for Federal civilian employees and members of the
uniformed services. It is similar to cash or deferred arrangements
established for private-sector employees under section 401(k) of the
Internal Revenue Code (26 U.S.C. 401(k)). The provisions of FERSA that
govern the TSP are codified, as amended, largely at 5 U.S.C. 8351 and
8401-80.
I. Background
When a TSP participant who is employed by the federal government
has an outstanding loan from their TSP account, their loan payments are
automatically made via payroll deductions. Loan payments might be
missed if payroll deductions are interrupted due to a temporary change
in payroll status, a transfer to another federal agency with a
different pay schedule, or other circumstances. When that happens, the
participant must make up the missed payment within a certain period of
time called a cure period.
In the past, if a participant's payroll deductions were
interrupted, they were required to make up the missed payment via
personal check, money order, or direct debit. When their payroll
deductions restarted, those resumed payments only counted for that
current month, not for the month that was missed. For example, if a
participant missed a June payment, but payroll deductions resumed in
July, the July deduction would only cover July's payment. The
participant would still owe June's payment, and if they did not make a
payment via personal check, money order, or direct debit by the end of
the cure period, the IRS would treat the loan as in default.
This final rule amends Title 5, Part 1655 of the Code of Federal
Regulations to make the loan payment process more flexible. Now, when
payroll deductions resume after an interruption, the first deduction
will apply to the missed payment. The next regularly scheduled
deduction will then be considered as the next required payment. In the
example above, the July deduction would apply to June payment, the
August deduction would apply to the July payment, and so on. This
effectively shifts the schedule forward by one month on a rolling basis
and gives the participant extra time to make up any missed payments
before a default occurs. This cycle continues, with each new payment
covering the prior missed one, so the participant remains one payment
behind. This cycle continues until (1) a one-time make up payment is
made via personal check, money order, or direct debit, (2) a default is
triggered because the loan has reached its maximum term, or (3) a
default is triggered because additional payments are missed. This gives
the participant flexibility on when to make up a missed payment, but it
does not extend the term of loan.
II. Response to Public Comments
On May 12, 2025, the FRTIB published a proposed rule to amend its
regulations (90 FR 20132, May 12, 2025). We received five comments. One
comment was outside the scope of this rule, three comments supported
the proposed rule, and one comment identified minor grammatical changes
intended to improve the clarity of the rule. We have adopted the
recommended grammatical changes.
In addition to supporting the proposed rule, one commentor
recommended clarifying that the TSP's cure period aligns with the
maximum timeframe allowable under the Internal Revenue Code. In
response, we have amended the definition of ``cure period'' in section
1655.1. The term ``cure period'' is now defined by reference to the
maximum timeframe allowable under Treasury Regulation Sec. 1.72(p)-1.
For the reasons described above, the FRTIB is adopting the proposed
rule as final, without substantive change. The final rule differs from
the proposed rule only in minor edits intended to improve clarity.
Regulatory Flexibility Act
This regulation will not have a significant economic impact on a
substantial number of small entities. This regulation will affect
Federal employees and members of the uniformed services who participate
in the Thrift Savings Plan, which is a Federal defined contribution
retirement savings plan created under the Federal Employees' Retirement
System Act of 1986 (FERSA), Public Law 99-335, 100 Stat. 514, and which
is administered by the FRTIB.
Paperwork Reduction Act
This final regulation does not require additional reporting under
the criteria of the Paperwork Reduction Act.
Unfunded Mandates Reform Act of 1995
Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602,
632, 653, and 1501-1571, the effects of this regulation on State,
local, and Tribal governments and the private sector have been
assessed. This regulation will not compel the expenditure in any one
year of $100 million or more by State, local, and Tribal governments,
in the aggregate, or by the private sector. Therefore, a statement
under 2 U.S.C. 1532 is not required.
Submission to Congress and the General Accountability Office
Pursuant to 5 U.S.C. 801(a)(1)(A), the FRTIB submitted a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives, and the Government Accountability
Office before publication of this rule in the Federal Register. This
rule is not a major rule as defined at 5 U.S.C. 804(2).
List of Subjects in 5 CFR Part 1655
Credit, Government employees, Pensions, Retirement.
Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons stated in the preamble, the FRTIB amends 5 CFR part
1655 as follows:
[[Page 59043]]
PART 1655--LOAN PROGRAM
0
1. The authority citation for part 1655 continues to read as follows:
Authority: 5 U.S.C. 8432d, 8433(g), 8439(a)(3) and 8474.
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2. Amend Sec. 1655.1, in paragraph (b), by revising the definition of
``Cure period'' as follows:
Sec. 1655.1 Definitions.
* * * * *
(b) * * *
Cure period means the maximum period permitted under 26 CFR
1.72(p)-1 during which a missed loan payment may be made to prevent the
loan from being declared a deemed distribution or loan offset.
* * * * *
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3. Amend Sec. 1655.14 by revising paragraph (e) and the last sentence
of paragraph (g) to read as follows:
Sec. 1655.14 Loan payments.
* * * * *
(e) Missed payment. In the case of a participant who has not
separated from Government service, if a payment is not made when due,
the TSP record keeper will notify the participant of the missed
payment.
(1) Making up the missed payment. The participant may make up the
missed payment using one of the following methods:
(i) A personal check,
(ii) Guaranteed funds, or
(iii) Direct debit.
(2) Deemed distribution. If the participant has not made a payment
in accordance with paragraph (e)(1) of this section and has not resumed
payroll deductions by the end of the cure period described in Sec.
1655.1, the TSP record keeper will declare the loan to be a deemed
distribution in accordance with Sec. 1655.15(a).
(3) Resuming payroll deductions. When payroll deductions resume,
the first deduction shall be applied to the earliest missed payment.
Each subsequent regularly scheduled deduction shall be applied to the
next missed payment. This process shall continue on a rolling basis,
such that the participant remains behind in payments until:
(i) A make up payment is submitted for each missed payment in
accordance with paragraph (e)(1) of this section;
(ii) The loan reaches its maximum term and a deemed distribution of
the remaining missed payment(s) is declared under Sec. 1655.15(a); or
(iii) Additional missed payments trigger a deemed distribution
under Sec. 1655.15(a).
* * * * *
(g) * * * If the participant does not make up all missed payments
by the end of the cure period described in Sec. 1655,1, the TSP record
keeper will declare the outstanding loan balance and accrued interest
to be a loan offset in accordance with Sec. 1655.15(b).
[FR Doc. 2025-23253 Filed 12-17-25; 8:45 am]
BILLING CODE 6760-01-P
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</html>Indexed from Federal Register on December 18, 2025.
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