TSP will pay vested balance in response to IRS levy

Plain-English summary

Chief Counsel addressed a proposed levy on a Thrift Savings Plan account. New Federal Retirement Thrift Investment Board regulations provided that the plan would pay the vested account balance in response to an IRS levy even if the taxpayer could not otherwise withdraw the funds. The advice noted that the Internal Revenue Manual prohibits a levy merely at the taxpayer's request and that required collection due process notices did not appear to have been issued for every period. It also directed the bankruptcy specialist to use Letter 4554 for excluded property with collection due process rights.

Ruling snapshot

• Question: What rules govern an IRS levy on the taxpayer's Thrift Savings Plan account?
• Outcome: Advice given that the vested balance is payable on levy, subject to IRM restrictions and required notices
• Key authorities: IRC levy procedures; IRM 5.9.17.4.4, 5.11.6.2, and 5.11.6.2.1

Full text (IRS public release)

ID: CCA_2014102912174411 [Third Party Communication:

UILC: 6331.00-00 Date of Communication: Month DD, YYYY]

Number: 201447028
Release Date: 11/21/2014
From:
Sent: Wednesday, October 29, 2014 12:17:44 PM
To:
Cc:
Bcc:
Subject: FW: Levy on TSP

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This is in response to your question about a levy on a TSP account. As previously noted, the FRTIB recently implemented regs that provide that the TSP will pay over the vested balance in a TSP account in response to an IRS levy, regardless of whether or not the taxpayer can withdraw those funds. Interim guidance is being drafted which will revise IRM 5.11.6.2.1. ------------------------------------------------------------
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In addition, note that the IRM prohibits levy at the request of the taxpayer. See 5.9.17.4.4.(6) and 5.11.6.2(3). --------------------------------------------------------------------------------------------------------------------------
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------------------------- (This section of the IRM is not being revised and is still applicable for making determinations to levy on TSP accounts).

It does not appear that the taxpayer has been provided with the required CDP notices for all periods.

Finally, per IRM 5.9.17.4.4(10) the bankruptcy specialist is to use letter 4554, Excluded Property - Final Notice with CDP Rights.

Please let me know if you have any further questions, thanks.