A few TSP questions..

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akg4y

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Hi everyone,

I am a new federal employee and have some slightly more complicated questions than the usual I think...

First question:
I just started this Monday and I was told that if I start contributing to the TSP now then I will not get a federal match until June 2009, can anyone else confirm that? The HR people basically said any contributions I make until then will be only my own, without any government contribution, which my dad said is incorrect (he is also a federal employee) but he was not sure.


Second question:
Am I correct in saying that the MAXIMUM a person can get into a TSP account is $31k per year? Assuming a person makes $310k per year then the government will match them 1:1 for the entire employee contribution of $15,500 (1% automatic contribution of 3.1K, 1:1 match for first 3% equals $9.3k, and 1:2 match for the next 2% is another 3.1k, for a total of 15.5K)
Is there any way to reach the IRS limit of $45,500 total?
 
akg4y said:
First question:
I just started this Monday and I was told that if I start contributing to the TSP now then I will not get a federal match until June 2009, can anyone else confirm that? The HR people basically said any contributions I make until then will be only my own, without any government contribution, which my dad said is incorrect (he is also a federal employee) but he was not sure.
Click to expand...

I'm not sure of the agency or the terms of your employment. I find it weird that it is a year, usually it is 60 days.
akg4y said:
Second question:
Am I correct in saying that the MAXIMUM a person can get into a TSP account is $31k per year? Assuming a person makes $310k per year then the government will match them 1:1 for the entire employee contribution of $15,500 (1% automatic contribution of 3.1K, 1:1 match for first 3% equals $9.3k, and 1:2 match for the next 2% is another 3.1k, for a total of 15.5K)
Is there any way to reach the IRS limit of $45,500 total?
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Individual limits is 15,500 tax deffered, you can put your whole paycheck in if you want. The issue is, Uncle Sam stops matching if you max that limit.
Review the following: http://tsp.gov/forms/oc91-13.pdf:cool:
 
I never heard of it taking a full year prior to receiving the matching funds.

Under the age of 50, you can max out your contributions up to 15.5K per year, but after that you can’t receive their matching funds. I have maxed out every year since the TSP started and can’t imagine what a young employee would have if they did the same over 40 years. If you managed to earn zero interest over 40 years and deposited 15.5K per year, you would have 620K and that’s not even factoring in the federal matching funds or interest!!! If I had to guess, I would stay 40 years maxed out would put you around 3 M or better at age 62!!! :cool::cool:

PS… I vote they change the law to include matching funds for the military workers too!!
 
TSP matches only 5%, not the entire $15,500. So if you maxed out at $15,500, the fed would match 5% of that.
 
luv2read said:
TSP matches only 5%, not the entire $15,500. So if you maxed out at $15,500, the fed would match 5% of that.
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I don't think so, it's the TSP matches up to 5% of your pay, the max pay is $310K, so if you somehow made $310K and you put in 5% into TSP that would be $15.5K, which would be matched by TSP with another $15.5K.

On the first point, it may be that you have to have worked for the Fed for a 7 months to one year before you get matching, if I read this correctly. http://www.tsp.gov/features/chapter02.html In that case, you might want to wait before starting to contribute until you can get matching. I think we need someone from HR here...
 
Aviator_Guy said:
PS… I vote they change the law to include matching funds for the military workers too!!
Click to expand...
I disagree, retirees from the military get a check after 20 years, based on an E-7 and base pay ~$3800/month means the retirement check needs to be 1900/month (50% base pay at 20 years. % goes up if one stays longer. Tops out at 75% base pay). This equates to the establishment of an annuity to be generated around $500K at 3.5% growth payable for 35 years. Now, what other job gives you that kind of "bonus" when you're done working for them. Adding more money to the program only costs taxpayers more. "Matching" seems nice but come on they will get a ton of money on the back side.

Don't get me wrong, I'm Air Force. But free job, free college, free retirement for some dedication. I think that's a really good trade-off after twenty years.:cool:
 
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Thanks for the responses. I have confirmed that the government only begins matching every June for employees that began before the preceeding May 31st. Im not sure how long this policy has been in effect, but it is definitely the case now.

Regarding my second question it appears the maximum a federal employee could put into a TSP including the federal match & assuming 310k in salary would be 31k per year. Unfortunately that means we cannot reach the IRS limit of 45.5k in the account per year.


I have also come up with a third question:
If a person is contributing to a separate 457 plan at the same time, do the contributions both count towards the $15.5k limit, or are they independent? The reason I ask is that contributions to a 457 plan are subject to an independent limit when compared to contributions to a 401k/403b plan, and I believe the TSP is considered a 401k/403b plan for IRS purposes.
 
Silverbird said:
I don't think so, it's the TSP matches up to 5% of your pay, the max pay is $310K, so if you somehow made $310K and you put in 5% into TSP that would be $15.5K, which would be matched by TSP with another $15.5K.

On the first point, it may be that you have to have worked for the Fed for a 7 months to one year before you get matching, if I read this correctly. http://www.tsp.gov/features/chapter02.html In that case, you might want to wait before starting to contribute until you can get matching. I think we need someone from HR here...
Click to expand...
I think that's what I was trying to say, I just said it wrong, thanks for the clarification.
 
akg4y said:
I have also come up with a third question:
If a person is contributing to a separate 457 plan at the same time, do the contributions both count towards the $15.5k limit, or are they independent? The reason I ask is that contributions to a 457 plan are subject to an independent limit when compared to contributions to a 401k/403b plan, and I believe the TSP is considered a 401k/403b plan for IRS purposes.
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From TSP.GOV:
Q9:What if I contribute to the TSP and another employer tax-deferred retirement plan during the year? A: The elective deferral and the over-50 catch-up contribution limits apply to combined employee contributions to your TSP account and another qualified employer plan as described under sections 401(k), 403(b), 408(k), or 501(c)(18) of the Tax Code.
See the Fact Sheet "Annual Limit on Elective Deferrals" for more information on participating in the TSP and another tax-deferred retirement plan, including what happens if the elective deferral or catch-up contribution limits are exceeded by contributing to more than one employer plan.
Click to expand...
 
Aviator_Guy said:
I never heard of it taking a full year prior to receiving the matching funds.

Under the age of 50, you can max out your contributions up to 15.5K per year, but after that you can’t receive their matching funds.:cool::cool:
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I found this a little confusing so I want to clarify it. You can max out your contributions and still receive matching funds at any age as long as you are still employed; once you reach age 50, you can contribute an additional $5,000 (for 2008) "catch up" for a total of $20,500 - and still receive matching funds. And the extra $5k doesn't count toward the elective deferral limit or matching funds.
 
akg4y said:
Thanks for the responses. I have confirmed that the government only begins matching every June for employees that began before the preceeding May 31st. Im not sure how long this policy has been in effect, but it is definitely the case now.
Click to expand...

That's incorrect. For employees who begin prior to May 31st, matching begins that December. If you begin after May 31st, matching begins June of the next year. From TSP.GOV:
Eligibility Dates for Agency Automatic
and Matching Contributions
If your FERS employment Your agency contributions
begins: will begin the first full pay period in:

12/1/04 — 5/31/05 December 2005
6/1/05 — 11/30/05 June 2006
12/1/05 — 5/31/06 December 2006
6/1/06 — 11/30/06 June 2007
12/1/06 — 5/31/07 December 2007
Click to expand...
It looks like December and June are the worst months to start work - you have to wait a full year to get matching. If you start in May or November, it's just a 6 month wait. How the hell did they come up with this schedule?
 
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luv2read said:
That's incorrect. For employees who begin prior to May 31st, matching begins that December. If you begin after May 31st, matching begins June of the next year. From TSP.GOV:
It looks like December and June are the worst months to start work - you have to wait a full year to get matching. If you start in May or November, it's just a 6 month wait. How the hell did they come up with this schedule?
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Well, now I change my mind on "automatic signup". It should be "automatic signup" when matching starts.:suspicious:
 
luv2read said:
From TSP.GOV:
Q9:What if I contribute to the TSP and another employer tax-deferred retirement plan during the year? A: The elective deferral and the over-50 catch-up contribution limits apply to combined employee contributions to your TSP account and another qualified employer plan as described under sections 401(k), 403(b), 408(k), or 501(c)(18) of the Tax Code.
See the Fact Sheet "Annual Limit on Elective Deferrals" for more information on participating in the TSP and another tax-deferred retirement plan, including what happens if the elective deferral or catch-up contribution limits are exceeded by contributing to more than one employer plan.
Click to expand...

Im not sure if this entirely answers my question. It doesnt list a 457 there, so does that mean the 457 limit is independent?
 
I got this from the IRS website checking for IRC 457 and 401K. The limits are independent.
2008 Contribution Limits for 401(k) and 457 The IRS has announced contribution limits for 2008. The limits did not increase from the 2007 limits. If you contribute to the 401(k) plan and a 403(b) plan in 2008, you must ensure that your contributions to both plans combined do not exceed $15,500 in 2008.

The plan contributions limits for 2008 are as follows:

$401(k) and 457 plan contribution maximums are $15,500 for each plan. Therefore, those participating in both plans can contribute a maximum of $31,000. For those who are also eligible for a 403(b) plan, please be aware that the combined maximum for contributions to a 403(b) plan and a 401(k) plan is $15,500, but the combined maximum for contributions to a 403(b) plan and a 457 plan is $31,000.

$For participants who will be age 50 or older anytime in 2008, the maximums for each plan (401(k) and 457) are $20,500.

$For participants utilizing the Special 457 Catch-Up feature prior to retirement, the maximum contribution is $31,000 for the 457 plan (subject to the total dollars available from prior unutilized contributions).
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This is a link to a benefits page with a great chart for all IRC retirement benefits.

http://benefitsattorney.com/modules.php?name=415

Here's a link to the updated schedule for agency matching from tsp.gov. There's all sorts of "hidden" links there. Cut and paste it into your address bar to go directly to the chart page; if you click the link, you will probably just end up at tsp.gov homepage.

http://www.tsp.gov/features/chapter02.html#chart

Here's the link to the CFR governing matching, current as of 7/9/08:

http://ecfr.gpoaccess.gov/cgi/t/tex...div8&view=text&node=5:3.0.4.5.1.2.48.3&idno=5

I'd show both of these last links to whoever gave you the incorrect information on eligibility for agency matching contributions.
 
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I also got a similar question. I know tsp contribution limit is $15500. I recently opened a roth IRA account and I know that there's $5k limit. So does that mean I can save up to $20500 a year?
 
You can deposit 20.5K in the first year you turn 50 and from that year on. I turned 50 last year, so I bumped my contributions up to the max limit last year. That works out to about 788 per pay period. You can deposit whatever amount you wish early in the year, just be really careful that you don’t lose any matching funds in the later half.

The FERS TSP matching funds are limited to only 5 percent of your base. So, if your base annual is 100K, you want to make triple sure that you maintain your contributions to take advantage of the matching funds for each pay period. The matching funds work out to about 192 per pay period for someone making a 100K base. For example, if you could afford to put in the full 20.5K in the first half of the year, you would lose some of your 5K matching funds in the later half of the year. Once you reach the max contribution limit, they don’t allow you to contribute until the next year cycle kicks in. I think the last pay period is 24, at that time the cycle starts all over again for the next year.

I try to push my contributions up early in the year to take advantage of interest earned over time. Then I throttle my contributions back later in the year making sure I still maintain a contribution level that allows me to collect all of my matching funds each and every pay period. The matching funds are something you never want to lose since it’s your money. :cool::cool:
 
As Aviator says.

In addition to that, you can make your usual IRA deposit. For 2008, it's $6K depending on your AGE and AGI.
 
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