What is the TSP?

TSP stands for the Thrift Savings Plan. The TSP is an important benefit designed to help you save for your future. The TSP is comparable to a private-sector tax-deferred 401(k) plan. You can participate in the TSP if you are covered by FERS, CSRS, or CSRS Offset.

The TSP offers all participants:

• Tax deferral on contributions
• A choice of 5 investment funds
• A loan program
• In-service withdrawals for financial hardship or after age 59
• A choice of post-separation withdrawal options
• The ability to transfer money from other eligible retirement savings plans into your TSP account

The TSP is especially important for FERS employees because it is one of three parts of your retirement coverage. Beginning July 1, 2001, FERS employees can contribute as much as 11% of basic pay each pay period, up to the IRS annual limit. (The IRS limit for 2001 is $10,500.) As a FERS employee, you can receive 2 types of agency contributions to your TSP account, which together can equal as much as 5 percent of your basic pay.

1. Agency Automatic (1%) Contributions. When you become eligible, your agency automatically deposits into your TSP account an amount equal to 1% of your basic pay each pay period, even if you do not contribute your own money. After 3 years of Federal civilian service (or 2 years in some cases), you are vested in these contributions and their earnings.
2. Agency Matching Contributions. When you become eligible, your agency will match the first 3% of basic pay you contribute each pay period dollar for dollar. Each dollar of the next 2% of basic pay will be matched 50 cents on the dollar. You are immediately vested in the matching contributions.

CSRS employees do not receive any Government contributions in their TSP accounts. However, CSRS employees can still take advantage of the TSP to provide a source of retirement income in addition to your CSRS retirement benefit. Beginning July 1, 2001, CSRS employees can contribute up to 6% of basic pay each pay period.

What are TSP make-up contributions?

Make-up contributions are employee contributions that could have been deducted from your pay earlier, but were actually deducted later because of an error.

When you are erroneously put in CSRS, CSRS Offset, or Social Security-Only rather than FERS, you are allowed to make up the TSP contributions that you could have made had you been in the correct retirement plan.

By law, your TSP make-up contributions must be made as payroll deductions. You can't pay your TSP make-up contributions by check or rollover. Subject to the provisions of the TSP error correction regulations, you can decide how much you pay in TSP make-up contributions and how long you want to take to make the payments. TSP make-up contributions are treated as tax-deferred compensation for the year in which they are made up, but are subject to the elective deferral limit(s) for the year(s) in which they could have been made. So, your make-up contributions will reduce your taxable income for the year that you actually make the contribution.

If you are in FERS and decide to pay TSP make-up contributions, your agency must also pay any attributable Agency Matching Contributions.

What are lost earnings?

Lost earnings are earnings that you would have received if your TSP make-up contributions were deposited when they would have been deposited had you been in the correct retirement plan.

Does FERCCA change anything about make-up TSP contributions and lost earnings?

Yes, FERCCA changes the rules on make-up contributions to the TSP for some individuals.

Before FERCCA, you did not receive lost earnings on any make-up contributions you had withheld from your pay because of a retirement coverage error. You did receive lost earnings on agency contributions made to your TSP account.

Under FERCCA, you can receive lost earnings on your make-up contributions if you choose to stay in FERS. You also continue to receive lost earnings on any contributions your agency makes to your TSP account.

Before you're asked to choose retirement plans, OPM will give you information about your TSP benefits under both CSRS Offset and FERS.

What happens to my TSP account when my error is corrected?

If you are erroneously covered by FERS and you choose to move out of FERS, FERCCA allows you to keep the employee contributions you made in your TSP account (plus the earnings attributable to your contributions) even if the contributions exceed 5 percent of the basic pay you earned for the pay period that contributions had been made. However, all Government contributions that were made to your account and the attributable earnings must be removed from your account if you do not choose FERS.

If you choose FERS coverage under FERCCA, you may make up those employee contributions that you could have made had you been correctly covered by FERS, as provided by the current TSP error correction legislation. In addition, you will receive the agency automatic (1%) contributions and agency matching contributions that you should have received had you been correctly covered by FERS. Finally, you will receive lost earnings on both your employee and agency make-up contributions. (Prior to FERCCA, lost earnings were payable only on agency make-up contributions.) The lost earnings on both employee and agency contributions will be determined the same way lost earnings are now determined on agency make-up contributions (that is, as provided by the current TSP regulations).

If I leave the Government, can I still get lost earnings on make-up contributions I made when my agency fixed the retirement error and put me in FERS?

Yes. You can get lost earnings on the make-up contributions you already made to your TSP account, if you decide to stay in FERS. You cannot get lost earnings if you choose CSRS Offset coverage over FERS.

Before I retired, my agency changed my retirement plan to FERS to correct an error. If I choose CSRS Offset, do I have to pay back the money my agency put in my Thrift Savings Plan (TSP) account?

When your agency corrected your retirement coverage to FERS, it also should have contributed make-up agency contributions and lost earnings on those contributions to your TSP account.

If you now choose CSRS Offset, no adjustments will be made to your TSP account. Instead, OPM will find out how much of your TSP account is based on what your agency contributed (this includes the earnings on those contributions). That dollar amount will form the basis for an actuarial reduction in your CSRS Offset retirement benefit.

I belonged in FERS. My agency discovered the mistake and corrected my records. I withdrew my TSP contributions. Can I now make an election under FERCCA?

It depends on when you withdrew your TSP contributions and the kind of withdrawal you made.

You can make an election under FERCCA if you:

• Separated from Government service after your agency corrected your records—but you did not retire—and the TSP automatically paid your account balance to you because it was $3,500 or less;
• Retired and withdrew your TSP contributions; or
• Received a financial hardship in-service withdrawal, or a TSP loan.

You cannot make an election under FERCCA if you:

• Separated from Government service after your agency corrected your records—but you did not retire—and you withdrew your TSP contributions. This does not include the TSP automatic payment described above; or
• Received an age-based in-service withdrawal from your TSP account while employed.

Will changing my retirement plan cost me any money?

No, there is no additional cost to you. However, if you choose FERS, you may elect to make additional TSP contributions (known as make-up contributions). These are contributions that you could have made if you had been correctly covered by FERS. Of course, you're the one who chooses how much additional contributions you want to make.

Has the Federal Retirement Thrift Investment Board issued any new regulations because of FERCCA?

Yes, the Federal Retirement Thrift Investment Board issued proposed rules on April 19, 2001.

Where can I get more information about the Thrift Savings Plan?

You can get more information about TSP by visiting www.tsp.gov.

If I move to FERS under FERCCA, how will my TSP make-up contributions be invested?

Your make-up contributions will be invested based on your most recent contribution allocation. For example, if you currently allocated 75% of the TSP contributions withheld from your pay to go to the C Fund and 25% to go to the G Fund, your make-up contributions will be allocated in the same manner. If you don't have a contribution allocation on file with the Federal Retirement Thrift Investment Board, the make-up contributions will be invested in the G Fund.

You may also get lost earnings on your make-up contributions. The amount of the lost earnings you receive are based on the contribution allocation in effect at the time the make-up contributions would have been made had you been correctly covered by FERS. For example, suppose you are going to make-up contributions for the period January 11, 1995 to July 6, 1995. During that period you may had allocated 45% of the contributions withheld from your pay to go to the G Fund and 55% to go to the C Fund. The lost earnings on your make-up would be computed as though 45% of your make-up went to the G Fund in 1995 and 55% had gone to the C Fund.

If you didn't have a contribution allocation, the lost earnings will be based on the return of the G Fund.

I'm eligible for relief under FERCCA and one of my options will be to choose FERS coverage. Will I be able to make makeup contributions to the TSP in a lump sum?

No. Makeup contributions may only be made by payroll deductions from basic pay. Contributions by check, money order, cash, or other forms of payment directly from the participant to the TSP, or from the participant to the employing agency for deposit to the TSP, are not permitted.

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