1655.9 Effect of loans on individual account.§ 1655.9 Effect of loans on individual account.
(a) The amount borrowed will be removed from the participant's account when the loan is disbursed. Consequently, these funds will no longer generate earnings.
(b) The loan principal will be disbursed from that portion of the account represented by employee contributions and attributable earnings, pro rata from each TSP Fund in which the account is invested and pro rata from tax-deferred and tax-exempt balances.
(c) The loan principal will be disbursed pro rata from the participant's traditional and Roth balances. The disbursement from the traditional balance will be further pro rated between the tax-deferred balance and tax-exempt balance. The disbursement from the Roth balance will be further pro rated between contributions in the Roth balance and earnings in the Roth balance. In addition, all loan disbursements will be distributed pro rata from all TSP Funds in which the participant's account is invested. All pro rated amounts will be based on the balances in each TSP Fund or source of contributions on the day the disbursement is processed.
(d) Loan payments, including both principal and interest, will be credited to the participant's individual account. Loan payments will be credited to the appropriate TSP Fund in accordance with the participant's most recent contribution allocation. Loan payments will be credited to the participant's traditional and Roth balances in the same proportion that the loan was distributed from the participant's account.[68 FR 35515, June 13, 2003, as amended at 70 FR 32218, June 1, 2005; 77 FR 26429, May 4, 2012]