Thrift Savings Plan
[a] The TSP is one of three components of the Federal Employees Retirement System (FERS; the others being the FERS annuity and Social Security) and is designed to closely resemble the dynamics of private sector 401(k) and Roth 401k plans (TSP implemented a Roth option in May 2012).
It is also open to employees covered under the older Civil Service Retirement System (CSRS) but with far fewer benefits (mainly the lack of matching contributions).
Civil Service Retirement System (CSRS) employees may join at any time, but are not automatically enrolled.
Service members in the Blended Retirement System (BRS) are automatically enrolled in the TSP at 5% of their base pay.
An employee or uniformed service member may change, stop, or restart contributions, at any time, with very few exceptions noted below.
As of October 1, 2020, new civilian employees and service members in the BRS are automatically enrolled in the TSP with a 5% deduction from their gross pay being deposited into the age-appropriate[b] Lifecycle (L) Fund, unless they make another choice or choose not to participate.
All FERS and CSRS employees and members of the uniformed services may contribute up to the Internal Revenue Code limitation, which is $22,500 for 2023.
Participants who are both civilian federal employees and members of the uniformed services will have two separate TSP accounts if they elect to contribute while in civilian and/or uniformed service status; however, the total tax-deferred contributions in both may not exceed the IRC elective deferral or catch-up limits.
In addition, the total tax-deferred, tax-exempt, and agency contributions made to both TSP accounts are subject to the IRC Section 415(c) overall limitation, which is $58,000 for 2021.
However, in 2006, Congress enacted legislation to sponsor a pilot program to offer matching contributions to new active duty enlistees.
TSP considers (and regularly promotes that) its operating expenses are extremely low by comparison to privately-operated mutual funds.
Employees may choose from any or all of the individual or Lifecycle funds in which to invest (any allocation must be expressed as a whole percentage) and may change their allocation for future pay periods at any time (if the request is received before noon Eastern time it is usually effective as of the close of business that day; otherwise, it is effective the following business day).
Participants may also choose to change the allocation percentage of their existing fund balances (referred to as "Interfund Transfers").
For example, the L 2050 fund allocation may be simulated by a portfolio consisting of 41.9% VOO, 24.9% VEA, 17.95% VXF, 9.77% VGSH, and 5.48% BND.
In addition, any overdue amount not repaid by the end of the following calendar quarter is also reported as taxable income.
A "financial hardship" withdrawal can only be made once every six months and is limited to one of five specific needs: Separated and retired participants are not eligible for TSP loans.
The participant then has 60 days to complete the rollover of the funds to a qualifying account to preserve their tax-deferred status.
Any funds remaining in a TSP account will accrue earnings and participants may make interfund transfer allocation changes to the balance.
