Frequently Asked Questions| Uniformed Services |
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The questions and answers below contain basic information about the TSP for members of the uniformed services. For further information, review TSP Features for Uniformed Services. (If you are a civilian participant, go to TSP Features for Civilians.)
1. What is the Thrift Savings Plan (TSP)?
The Thrift Savings Plan (TSP) is a retirement savings and investment plan that has been available to civilian employees of the Federal Government since 1987. The Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 extended participation to members of the uniformed services.
The purpose of the TSP is to provide retirement income. It offers participants the same type of savings and tax benefits that many private corporations offer their employees under so-called "401(k) plans."
The TSP allows participants to save a portion of their pay in special retirement accounts administered by the Federal Retirement Thrift Investment Board. The money that participants invest in the TSP generally comes from pre-tax dollars and reduces their current taxable income. Members who serve in a combat zone can also contribute from tax-exempt dollars. Such contributions are tax-free when withdrawn; however, earnings on such contributions are taxed when they are withdrawn.
2. How does TSP participation for the uniformed services differ from TSP participation for civilians?
Generally, uniformed services members will participate under the same rules and receive the same benefits as civilian TSP participants. However, the contribution rules are different for uniformed services members. Consequently, two separate accounts will be maintained for participants who are both Federal civilian employees and uniformed services members (i.e., reservists).
3. How does the TSP differ from the Military Retirement System?
Military retired pay is a defined benefit program. This means that the benefit you receive from the military retirement system is based on your years of service and the rank you hold at the time of your retirement, rather than on the amount of your contributions and earnings.
The TSP, on the other hand, is a defined contribution plan. The balance in your TSP account will depend on how much you have contributed to your account during your working years and the earnings on those contributions.
Participation in the TSP is optional and not automatic. You must sign up with your service to participate in the TSP. You contribute to the TSP from your own pay, and the money you contribute and the earnings on your contributions belong to you. They are yours to keep even if you do not serve the 20 years ordinarily necessary to receive military retired pay.
4. Who can contribute to the TSP as members of the uniformed services?
Uniformed members of the Army, Navy, Air Force, Marine Corps, Coast Guard, Public Health Service, and the National Oceanic and Atmospheric Administration serving on active duty, and members of the Ready Reserve (including the National Guard) of those services in any pay status can contribute to the TSP.
5. Can uniformed services retirees contribute to the TSP?
Uniformed services retirees cannot contribute to the TSP. Only pay for service (i.e., basic pay, incentive pay, and special pay, including bonuses) can be contributed to the TSP.
The TSP is designed to allow active duty members and members of the Ready Reserve to save a part of their military pay for retirement in a plan that offers pre-tax savings, tax-deferred investment earnings, and low administrative and investment expenses.
6. When will I be able to join the TSP?
Members of the uniformed services can begin making contributions to the TSP at any time.
7. What if I have two accounts (civilian and uniformed services)?
If you have both a civilian TSP account and a uniformed services TSP account, they will be treated separately for most purposes. This means, for example, that if you want to move your money among investment funds in each account, you must submit two interfund transfer requests, one for each account. However, the accounts will be combined for calculating the Internal Revenue Code's elective deferral limit on annual contributions and for determining the amount you are eligible to borrow from the TSP. Highly paid FERS employees who also have a TSP account as reservists need to consider how their agency matching contributions are affected before contributing to their reservist TSP accounts. (See "How much can I contribute?" and "Can I withdraw or borrow from my account before I separate from the uniformed services?")
In 2006, the TSP eliminated its contribution limits. At that time, contributions became limited only by the elective deferral amount ($15,500 in 2007). You may also contribute all or any whole percentage of any incentive or special pay (including reenlistment or other bonuses) you receive. However, the total amount you contribute each year cannot exceed the Internal Revenue Code's elective deferral limit for the year. Please refer to the Defense Finance and Accounting System (DFAS) Web site at www.dfas.mil or talk to your service TSP representative for information about uniformed services elements of pay.
If you have another eligible employer plan described under sections 401(k) or 403(b) of the Internal Revenue Code, or if you are a member of the Ready Reserve or National Guard and have a civilian TSP account, the total of all your contributions to all of your plans cannot exceed the Internal Revenue Code's elective deferral limit. However, if you also participate in a Section 457 plan, your contributions to the TSP are not limited by any of your contributions to your section 457 plan.
In addition, if you contribute tax-exempt dollars from combat zone pay (see question 10 below), your contributions are subject to another Internal Revenue Code section (26 U.S.C. 415(c)) which limits your contributions to the TSP and other qualified plans in 2007 to $45,000 or 100 percent of your compensation, whichever is less. This includes pre-tax and tax-exempt contributions to the TSP for the year.
9. Do I have to be contributing from my basic pay to contribute from incentive pay or special pay (including bonuses)?
Yes, to contribute from incentive pay or special pay (including bonuses), you must be contributing from basic pay. If you are contributing from your basic pay, you may elect to contribute from a bonus at any time. Consequently, if you anticipate receiving a large bonus (such as a reenlistment bonus) and want to contribute all or part of it to the TSP, you should make a basic pay contribution election during one of the periods described in the answer to "When will I be able to join the TSP?".
10. What if all or part of my pay is subject to the combat zone exclusion?
If you serve in a combat zone, special rules apply. Because all or a part of pay earned during a month you serve in a combat zone is tax exempt, you do not pay tax on this money. As a consequence, contributions from tax-exempt pay are not subject to the Internal Revenue Codes elective deferral limit. (However, these contributions do count against the Internal Revenue Codes section 415(c) limits described in "How much can I contribute?").
11. Do I contribute money monthly or annually?
Your payroll office will deduct your contributions from your pay each month based on your election and will remit those contributions to the TSP at the end of every month. You cannot send a check to the TSP; once you have received your pay, you cannot contribute any of it to the TSP. If you want to contribute all or part of a bonus to your uniformed services TSP account, that contribution must be deducted by your payroll office and remitted to the TSP at the time the bonus is paid to you.
12. Will the uniformed services match my contributions?
The law allows the secretaries of the uniformed services to designate critical military specialties for matching contributions. Members serving in those specialties who agree to serve on active duty (AD) (this provision specifically says AD, so Troop Program Units (TPU) and Individual Mobilization Augmentees (IMA) ready reservists are excluded) for 6 years may be eligible for matching contributions. The matching contributions apply only to amounts contributed from basic pay. The matching contributions and their attributable earnings will be taxable when you withdraw them from the TSP.
13. Can I contribute to an Individual Retirement Account and the Thrift Savings Plan in the same year?
Yes. Participation in the TSP does not affect your ability to contribute to an IRA. However, because you are a uniformed services member covered by the uniformed services retirement plan, your ability to make tax-deductible contributions to an IRA depends upon your income and that of your spouse. Your IRA provider or your tax advisor can give you specific information about the different types of IRAs, the rules affecting each type, and how they apply to your situation. You can also obtain a copy of IRS Publication 590, Individual Retirement Arrangements (IRAs).
If you have a traditional IRA that contains before tax money, but would prefer not to manage two separate accounts, you may transfer the balance of your traditional IRA into the Thrift Savings Plan. For more information, see Form TSP-U-60, Request for a Transfer Into the TSP.
14. How are my contributions invested?
You can invest any portion of your TSP account in the available TSP investment funds.
The TSP offers you two approaches to investing your money:
(1) Lifecycle (L) Funds, and
(2) Individual TSP Funds
The L Funds are designed for participants who may not have the time, experience, or interest to manage their TSP retirement savings.
The five L Funds are:
- L 2040 (For time horizons of 2035 and later)
- L 2030 (For time horizons of 2025 through 2034)
- L 2020 (For time horizons of 2015 through 2024)
- L 2010 (For time horizons of 2008 through 2014)
- L Income (For participants who are now withdrawing or planning to withdraw before 2008)
- G Fund ( Government Securities Investment Fund)
- F Fund ( Fixed Income Index Investment Fund)
- C Fund (Common Stock Index Investment Fund)
- S Fund (Small Capitalization Stock Index Investment Fund)
- I Fund (International Stock Index Investment Fund)
The TSP will invest your contributions in the G Fund until you submit a contribution allocation to the TSP. Once your TSP account is established (i.e., upon receipt of your first contribution), the TSP will send you an introductory letter, a Personal Identification Number (PIN) for accessing your account on the Thriftline and a Web password for accessing your account through the TSP Web site. After you receive this information, you will be able to use it on the TSP Web site or the ThriftLine (1-TSP-YOU-FRST) to make a contribution allocation to invest your future contributions in any of the investment funds. Because this Web site and the ThriftLine are the most efficient ways to make investment requests, we encourage participants to use them. However, you may also make allocation requests by mailing Form TSP-U-50, Investment Allocation to the TSP. Your new contribution allocation will ordinarily become effective within two business days of its receipt.
15. How do I change the investment of my existing account balance?
To change the investment of your existing account balance, you must request an interfund transfer. With an interfund transfer, you can move some or all of your existing balance among the available funds. An interfund transfer is different from a contribution allocation because the interfund transfer involves only money that is already in your account. It does not change the way future contributions will be allocated to the funds.
Once your account is established and you have your PIN and password, you will be able to request an interfund transfer on this TSP Web site or the ThriftLine. Because this TSP Web site and the ThriftLine (1-TSP-YOU-FRST) are the most efficient means to make investment requests, we encourage participants to use them. However, you may also make interfund transfer requests by mailing Form TSP-U-50, Investment Allocation, to the TSP. Your interfund transfer will ordinarily become affective within two business days of its receipt.
16. Can I withdraw or borrow from my account before I separate from the uniformed services?
The TSP is a long-term retirement savings plan that provides special tax advantages. Therefore, you generally cannot withdraw your TSP account before you separate from service. However, the law authorizes two types of in-service withdrawals:
Age-based in-service withdrawals for participants who are 59 or older, and
Financial hardship in-service withdrawals for participants who can certify that they have a genuine financial hardship.
You must meet certain criteria to receive an in-service withdrawal.
When you make an in-service withdrawal, you cannot return or repay the money you remove from your account, so you permanently deplete your retirement savings and future earnings on the amount withdrawn. In addition, you cannot contribute to your TSP account for 6 months if you make a financial hardship withdrawal. Thus, before making an in-service withdrawal, you should evaluate your options to see if a TSP loan would be more beneficial.
The TSP loan program allows you to borrow your own contributions and attributable earnings from your account for a general purpose loan or for a loan to purchase your primary residence. However, you must be in pay status to be eligible for a loan. The minimum loan amount is $1,000. The maximum loan amount is $50,000, but the amount you can borrow may be less, depending on any outstanding TSP loans you have already taken and certain limits set by the Internal Revenue Code. (If you have both a uniformed services and a civilian TSP account, your account balances will be combined for purposes of calculating the maximum amount you may borrow from either account.) You will also pay interest on the amount borrowed; the loan repayment, including interest, will go back into your TSP account. There is a $50 fee for taking a loan; the fee is deductible from the proceeds of the loan.
Because the TSP is a retirement plan, you may be better served if you can avoid borrowing or making in-service withdrawals from your TSP account thus allowing your contributions to accumulate earnings.
17. What are my withdrawal options once I separate from the uniformed services?
When you separate from the uniformed services, you may leave your money in the TSP or you may make a post-separation withdrawal.
If you leave your money in the TSP, it will continue to accrue earnings. Although you will not be able to continue to make contributions, you will be able to make interfund transfers. You must begin withdrawing your account no later than April 1 of the year following the year you turn age 70½ and are separated from service
If you decide to withdraw your money, there are two types of post-separation withdrawals:
Partial withdrawal. You can take out $1,000 or more, and leave the rest in your account until you decide to withdraw it. You may make only one partial withdrawal from your account. If you made an age-based in-service withdrawal, you are not eligible for a partial withdrawal.
Full withdrawal. You can make a full withdrawal of your account using one — or any combination — of three withdrawal options available to you:
Note: Certain rule and restrictions apply to Roth IRAs. We strongly encourage you to consult a tax advisor regarding your eligibility for, and the tax consequences of, making a Roth transfer.
A mixed withdrawal allows you to combine any or all of the three withdrawal options. However, if you request a mixed withdrawal with an annuity, the percentage of your account used to purchase the annuity cannot equal a dollar amount of less than $3,500.
*TSP tax-exempt contributions (i.e., contributions from pay earned in a combat zone) may be transferred to a traditional IRA, or transferred to certain eligible employer plans or a Roth IRA, but only if the financial institution or plan certifies that it accepts tax-exempt balances. Funds not accepted will be paid directly to you. If you transfer balances from your uniformed service TSP account to your civilian TSP account, the TSP will not accept tax-exempt money into the civilian account.
18. When can I withdraw my money from the TSP without penalty?
While you are a member of the uniformed services, any tax-deferred money you withdraw before age 59 as a financial hardship in-service withdrawal is subject to the IRS 10% early withdrawal penalty, as well as regular income tax.
With respect to post-separation withdrawals, if you separate from service during or after the year in which you turn age 55, your withdrawal will not be subject to the early withdrawal penalty tax. If you separate before the year you reach age 55, you can transfer your TSP account to a traditional IRA, eligible employer plan (e.g., 401(k) plan, your civilian TSP account) or a Roth IRA, or begin receiving monthly payments based on life expectancy or annuity payments without penalty. Note: If you are eligible to transfer to a Roth IRA, you will pay no tax penalty, but you will have to pay Federal taxes on the full amount you transfer, because Roth IRAs accept only after-tax money.
19. Does my spouse have any rights with respect to my TSP account?
Uniformed services members are subject to spousal rights rules. Your spouse must consent, in writing, to all loans and in-service withdrawals. In addition, if you make a post-separation withdrawal, your spouse has a right to a specified form of joint annuity (i.e., 50% survivor benefit, level payments, no cash refund). If you do not want this type of annuity, your spouse must waive his or her right to it in writing.
The Federal Retirement Thrift Investment Board administers the TSP. Your service and payroll offices (e.g., the Defense Finance and Accounting Service) also play an important role in enrolling you in the TSP, establishing your account, and transmitting your personal information (e.g., name, address) and contributions to the TSP.
The Board. The Federal Retirement Thrift Investment Board is an independent Government agency. The five members of the Board and the Executive Director are required by law to manage the TSP prudently and solely in the interest of participants and their beneficiaries.
Money in the TSP and earnings on that money cannot be used for any purpose other than providing benefits to participants and their beneficiaries and paying TSP administrative expenses.
The assets of the TSP are called the Thrift Savings Fund. The financial statements of the Thrift Savings Fund are required by law to be audited annually (The Plan year is the calendar year). You may obtain the audited financial statements from this Web site.
Your Service. While you are employed, your service is your primary TSP contact. Your service will provide you with TSP forms and informational materials and answer your questions about the TSP.
To enroll in the TSP you must submit the Form TSP-U-1, Election Form, to your service, or enroll electronically as instructed by your service. Your service's payroll office will report to the TSP the dollar amount of contributions to your account each pay period.
You should review your monthly leave and earnings statement (LES) and your TSP participant statements to ensure that your service provides the TSP with correct and up-to-date information about you and your contributions. Your service must also provide the TSP with the personal information that is necessary to maintain your account (e.g., your address), as long as you are a member of the uniformed services. If you have questions about your TSP account, or if your personal information is incorrect, contact the office in your service that is responsible for managing the TSP program. Your service is responsible for correcting errors in your personal information, contributions, and loan payment amounts.
The TSP. The Board has contracted with a number of private sector companies to provide record-keeping services for the TSP, which include maintaining the accounts of TSP participants, processing requests for benefits, and providing call center support.
The TSP processes contribution allocations, loans, withdrawals, and interfund transfers, as well as participants' designations of beneficiaries. The TSP is also your primary contact for information about your account after you separate from the uniformed services.