About Thrift Savings Plans

By: Terry Parker

What is a thrift savings plan? A thrift savings plan or TSP is a retirement plan for civilians who are employed by the United States government and are members of the Uniformed Services of the United States.

The TSP falls under the category of what is known more broadly as a type of defined contribution plan, and is administrated and regulated by the Federal Thrift Investment Board.

TSP plans are similar to 401k plans, since the retirement funds in the account depends on how much has been contributed both by the employee and their employer during their working years, as well as the earnings of these contributions.

Which employees are eligible? If you are covered by FERS, CSRS, or CRS offset, you are eligible for a TSP plan.

All participants are eligible to receive tax deferral on contributions, in service withdrawals for financial hardship beginning on or after age 59, a choice of five investment funds, the ability to transfer monies from other eligible retirement savings account plans into a TSP account, a loan program and a choice of post separation withdrawal options.

For certain FERS civilian employees, with a TSP plan, the government also makes automatic matching contributions. Employees who are under the CSRS or civil service retirement system are eligible for a TSP plan, but are not eligible for matching contributions.

Typically, in this case, the matching contributions are one percent independent of employee contributions, and then .05 percent for each one percent contributed by an employee thereafter. Military members and those serving in the armed forces, generally, are not eligible for these matching contributions.

In the case of FERS employees, the TSP is one of three parts of total retirement coverage, and FERS employees have the option of receiving two different types of agency contributions to their TSP accounts, which together, can equal as much as fiver percent of basic pay.

These are known as agency automatic and agency matching contributions respectfully. With an agency automatic contribution, once an employee is eligible, their agency automatically makes deposits into their TSP account, regardless of employee contribution amount, as stated above, up to one percent of basic pay, up to the IRS allowed annual limit.

With an agency matching contribution, once an employee becomes eligble, the agency will match the first three percent of basic pay, with the next subsequent two percent of basic pay matched fifty cents on the dollar.

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