(a) Suspending TSP loans during nonpay status. If the TSP record keeper is notified that an employee entered into a nonpay status to perform military service, any outstanding TSP loan from a civilian TSP account will be suspended, that is, it will not be declared a loan foreclosure while the employee is performing military service.

(1) Interest will accrue on the loan balance during the period of suspension. When the employee returns to civilian pay status, the employing agency will resume deducting loan payments from the participant's basic pay and the TSP record keeper will reamortize the loan (which will include interest accrued during the period of military service). The maximum loan repayment term will be extended by the employee's period of military service. Consequently, when the employee returns to pay status, the TSP record keeper must receive documentation to show the beginning and ending dates of military service.

(2) The TSP record keeper may close the loan account and declare it to be a loan foreclosure if the TSP record keeper does not receive documentation that the employee entered into nonpay status. However, this can be reversed in accordance with paragraph (c) of this section.

(b) Restoring post-employment distributions. An employee who separates from civilian service to perform military service and who receives an automatic payment pursuant to § 1650.11 may return to the TSP an amount equal to the amount of the payment. The employee must notify the TSP record keeper of his or her intent to return the distributed funds within 90 days of the date the employee returns to civilian service or pay status; if the employee is eligible to return a distribution, the TSP record keeper will then inform the employee of the actions that must be taken to return the funds.

(c) Reversing loan foreclosures. An employee may request that a loan foreclosure be reversed it resulted from the employee's separation or placement in nonpay status to perform military service. The TSP record keeper will reverse the loan foreclosure under the process described as follows:

(1) An employee who received a post-employment distribution when he or she separated to perform military service can have a loan foreclosure reversed only if the distributed amount is returned as described in paragraph (b) of this section;

(2) A loan foreclosure can be reversed either by reinstating the loan or by repaying it in full. The TSP loan can be reinstated only if the employee agrees to repay the loan within the maximum loan repayment term plus the length of military service, and if, after reinstatement of the loan, the employee will have no more than two outstanding loans, only one of which is a residential loan; and

(3) The employee must notify the TSP record keeper of his or her intent to reverse a loan foreclosure within 90 days of the date the employee returns to civilian service or pay status; if the employee is eligible to reverse a loan foreclosure, the TSP record keeper will then inform the employee of the actions that must be taken to reverse the distribution.

(d) Breakage. Employees will not receive breakage on amounts returned to their accounts under this section.