Basics of the Thrift Savings Plan and Contributions

Nov 1, 2017


Over the next few weeks, we’ll be looking at the Thrift Savings Plan. While previous blogs have covered basic information about the TSP, they haven’t covered topics such as contributions made to the TSP in a non-pay status, military service, and more.

First, we’ll look at the basics of the TSP again before moving into the more complicated topics. This post will focus on what the TSP is and employee contributions.

What is the Thrift Savings Plan?

The TSP is one part of the Federal Employees Retirement System (FERS) and if you’re a Civil Service Retirement System (CSRS) or military member, then it’s an annuity supplement.

  • If you are a FERS employee hired (or FERS or CSRS employee rehired) after July 31, 2010, your agency automatically enrolled you into the TSP with 3% of your basic pay being deducted from your paycheck. Under FERS, you also get agency contributions, so the total automatic contribution every pay period is 7%.
  • If you’re a FERS employee hired before August 1, 2010, and not contributing your own money, you still are receiving Agency Automatic (1%) Contributions. To receive agency matching, you must make an election through your agency to start contributing your own money.
  • If you’re a CSRS employee or uniformed service member, you must make a TSP contribution election through your agency or service to establish a TSP account. And you don’t receive an agency contribution.

Employee Contributions

There are two types of employee contributions: regular and catch-up. You also must contribute the max of regular contributions to be eligible to make catch up ones.

Regular contributions are payroll deductions that come out of your basic pay before taxes are withheld (Traditional) or after taxes (Roth). There are special conditions for uniformed service members. In addition to basic pay, you can also contribute anywhere from 1-100% of any incentive, special, or bonus pay—if you elect to contribute at least 1% from your basic pay. You may elect to contribute from any of these pays even if you aren’t currently receiving them.

Catch-up contributions are payroll deductions that participants who are 50 or older may be able to make in addition to regular ones. These are voluntary and can be either Traditional or Roth. To be eligible to make catch-up contributions, you must already be contributing an amount that will reach the Internal Revenue Code (IRC) elective deferral limit by the end of the year. In the year you turn 50, you can begin making these anytime. Your catch-ups will stop automatically when you meet the IRC catch up contribution limit or the end of the calendar year, whichever is first. These also won’t continue year to year, you must make a new election each calendar year.

Uniformed service members have special conditions:

  • You can’t make catch-up contributions from incentive, special, or bonus pay. Also, your traditional catch-ups will stop if you’re receiving tax-exempt pay in a combat zone. Only Roth catch-up contributions are allowed from tax-exempt pay.

The next post will look at what your agency contributes.

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