Thrift Savings Plan: What you need to know By Staff Sgt. James Roach, Fiscal Branch
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he Thrift Savings Plan is a retirement savings program for military members and civilian federal employees. TSP is a tax-deferred fund, which means the money contributed to the account is deducted right away from the person’s taxable income, and the money in the fund isn’t taxed until it’s withdrawn at retirement, usually after age 59 1/2, which is a significant tax reduction. The TSP is part of the Federal Employees Retirement System (FERS) designed to closely resemble the dynamics of private sector 401(k) plans. FERS employees are eligible to join TSP immediately upon starting work and may join at any time thereafter. Both FERS and CSRS employees and member of the uniformed services may contribute up to the Internal Revenue Code limitation, which is $16,500 for 2010. Uniformed service members are permitted to make contributions from both basic pay as well as from incentive, special, or bonus pay, but are subject to the regular contribution limits. Now PAY ATTENTION- Members of the uniformed services who deploy to designated combat zones are subject to the combat zone tax exclusion, which allows tax-exempt income earned. Contributions to the TSP by uniformed service members in a combat zone are contributed to the TSP as tax-exempt, and accrue tax-deferred earnings. Tax-exempt contributions are not subject to the IRC elective deferral limit, but are combined with taxdeferred contributions made and are subject to the IRC section 415(c) annual additions limit of $49,000 (as of 2010). Bottom-line: If you can afford to throw as much money in to the TSP as possible while you are deployed; that money will not be taxed when you withdraw it at 59 1/2. Don’t go broke, but if you can afford a higher percentage of you income deferred; do it. Uniformed service members are eligible for matching contributions only if the secretary of the specific service designates “critical specialties” eligible for such. As of 2010, no specific specialty has been designated as such. However in 2006, Congress enacted legislation to sponsor a pilot program to offer matching contributions to new active duty enlistees. This program was administered by the Department of the Army from April 1, 2006 through December 31, 2008. Enlistees who qualified for TSP matching during this period (provided completion and returned paperwork was processed as of initial enlistment) received a dollar for dollar matching contribution on the first three percent of their contributions from basic pay; and fifty cents on the dollar for the next two percent contributed for the duration of their first term of enlistment. You have control over the percentage of your pay you would like deferred to the TSP. By logging onto My Pay, you will have the option to change your contribution anytime you like. Getting set up is easy. Go to the TSP Website by going to https://www. tsp.gov/index.shtml. Once enrolled your USERID and password will be sent to you in separate mailings. Everyone is strongly encouraged to participate in this program. Compounded with your military retirement and any other investments; your golden years could be just that: GOLDEN. Arrowhead! If you have any questions about the Thrift Savings Plan, please contact a member of the Finance Office. Or visit the TSP website by clicking here.