Thrift Savings Plan Opens to Military Oct. 9

The Thrift Savings Plan is a retirement and investment plan that has been available to civilian government workers since 1987. Congress extended the plan to include service members in 2000.

"It's in addition to your regular retirement," said Army Lt. Col. Tom Emswiler, a tax expert with DoD's Office of Military Compensation. "It's an optional program."

The open season for signing up will run from Oct. 9 to Dec. 8. Deductions start in January 2002. In 2002, service members can contribute up to 7 percent of their basic pay. The maximum amount service members can contribute from basic pay will change. The current limit of 7 percent of basic pay will rise to 10 percent by 2005 and become unlimited in 2006.

Unlike civilians, who cannot make lump-sum payments into the program, service members may also contribute all or a percentage of any special pay, incentive pay, or bonus pay they receive.

"You can contribute from 1 percent to 100 percent of your special pays, incentives and bonuses into the thrift plan," Emswiler said.

The total amount generally cannot exceed $10,500 for the year. Contributions from pay earned in a combat zone do not count against the $10,500 ceiling. Combat zone contributions are subject to a different limitation, however, 25% of pay or $35,000, whichever is less.

Like civilian employees in the program, service members must choose how they want their money invested. Right now, there are three funds to choose from. The funds run the gamut of safe -- the G Fund invests in special government bonds -- to riskier investments -- the C Fund tied to the stock market. There is also an F Fund for investing in commercial bonds.

TSP will unveil the new S and I funds in May. S Fund investments go to a stock index fund that paces small businesses. I Fund investors will track international companies the same way.

Service members will be able to start, change or reallocate their TSP contributions during two open seasons held each year. These are November to January and May to July.

"Because bonuses are hard to predict, if you are already participating in the plan and contributing from basic pay and you receive, for example, a re-enlistment bonus, you can elect to contribute at any time," Emswiler said.

Contributions to the plan come from "pre-tax" dollars. Service members pay no federal or state income taxes on contributions or earnings until they're withdrawn.

The services will have teams visiting members to explain the program. Until then, see the thrift plan's uniformed services page at www.tsp.gov/uniserv/index.html for more information.