The TSP is a tax-deferred retirement savings and investment plan for Federal employees under CSRS and FERS. Its purpose is to provide additional retirement income while saving on taxes right now. (Neither TSP contributions nor their earnings are taxed until they are withdrawn.) The TSP offers federal civilian employees the same type of savings and tax benefits that many private companies offer under "401(k)" plans.
TSP information is also available on the TSP website. If you need additional TSP information, contact us.
Following is a brief summary of the most significant TSP benefits and provisions:
Employee Contributions
Effective August 1, 2010: As a new federal employee or a rehired (with a break in service) federal employee covered under FERS or CSRS, you will be automatically enrolled to contribute three percent of your basic pay each pay period to your TSP account. These contributions will be invested in the Government Securities Investment (G) fund.
New employees who want to change (increase or decrease) their TSP contributions can submit a TSP-1 form or make an election using MyEPP at any time. TSP-1s should be sent directly to the
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. Contribution elections will be effective the beginning of the pay period following receipt of the change.
New employees who do not wish to participate in the TSP are required to submit a TSP-1 during the first pay period to stop the automatic contribution. A refund of automatic TSP contributions is available directly from TSP. The request for a refund must be made within 90 days after the first automatic contribution. Transferees, rehires (without a break in service), and current employees retain their existing TSP eligibility.
The Internal Revenue Code (I.R.C.) places limits on the dollar amount of contributions you can make to the TSP.
The Internal Revenue Service (IRS) calculates them every year and they can change annually.
For tax year 2012, the elective deferral limit is $17,000.
Agency Automatic Contributions and Matching Contributions
FERS employees receive agency automatic and matching contributions. TSP savings are a very important part of the retirement package for FERS employees. FERS employees are strongly encouraged to contribute to the TSP!
Agency Automatic (1%) Contributions- An amount your agency contributes to your TSP account that is equal to 1% of your gross basic pay. Your agency makes this contribution to your TSP account even if you do not contribute your own money to your TSP account.
Matching Contributions- When you contribute your own funds to your TSP account, you will also receive matching contributions from your agency. Matching contributions apply to the first 5% of pay that you contribute each pay period. Your contributions are matched dollar for dollar on the first 3% of pay you contribute, then $.50 on the dollar for contributions between 3% and 5%. In order to take full advantage of the agency automatic 1% and matching contributions, employees and newly hired employees (who were automatically enrolled to contribute 3%) need to be contributing at least 5%. This can be done by submitting the TSP-1 form to the
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or by making a change using MyEPP.
Although the TSP is still a great investment, CSRS employees do not receive agency automatic contributions or matching funds.
Investments
The TSP offers a choice of six investment funds. When your TSP account is initially established, contributions are placed in the G Fund; however, you may change your investment allocations at any time by accessing your TSP account. Detailed information about each of the funds and historical rates of return can be found on the TSP website.
TSP Loans
The TSP Loan Program gives you access to the money you have contributed to the TSP and to the earnings on that money. (You cannot borrow any agency contributions or any earnings attributable to those contributions.) There are two types of loans-a general-purpose loan, and a loan for the purchase of your primary residence. Before you consider a loan, talk to the
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.
Transferring Funds into the TSP
The TSP can accept transfers (or rollovers) of eligible distributions from any eligible retirement plan, including a traditional IRA. Employees should use the TSP-60 form (link to this form) to transfer eligible funds into the TSP. A transfer or rollover cannot be used to establish a TSP account.
TSP Catch-up Contributions
Eligible employees are permitted to make tax-deferred "catch-up" contributions from their basic pay to their TSP accounts. Catch-up contributions made are in addition to regular TSP contributions. An employee who meets all of the following requirements is eligible to make catch-up contributions:
- The employee must be age 50 or older in the calendar year the catch-up contributions are made. The participant's birthday can be as late as December 31 of that year.
- The employee must be at work or on paid leave during the pay period in order to make contributions.
- The employee must be contributing the maximum annual contribution limit for the current tax year.
You can elect to make catch-up contributions, change the amount of your catch-up contributions, or stop your catch-up contributions at any time by completing a TSP-1-C form or by accessing MyEPP. Elections are effective at the beginning of the pay period after receipt of the election or change. Catch-up contributions are invested according to your most recent contribution allocation on file with the TSP.
For tax year 2012, the TSP catch-up contribution limit is $5,500.