Can TSP funds be used to purchase federal service credit?

[Kimmy]

I have applied for service credit and am waiting to find out the amount due. Can TSP funds be used to purchase federal service credit?

 

[Kaufmanrider]

I have applied for service credit and am waiting to find out the amount due. Can TSP funds be used to purchase federal service credit?

I'd assume the only way you could get money out of TSP is to take a loan from your TSP.

Others can chime in if I am incorrect.

 

[driz]

I can't see how you could take money out until you are retired without borrowing against it. Assuming you have lots of years to go till then I always thought the best way to pay these things off is by allotment automatically over time. It's nothing you want to put off forever yet not something that requires "jumping right on" either. A good way to raise said contribution is to just stick whatever your next pay raise notrust:yea I know bad subject) whenever you get one, onto the amount. Doing it this way is a lot easier than butchering your IRA to buy service credit and believe me a WHOLE LOT EASIER that the crap I had to go through to do mine in the early 90's.

 

[James48843]

I have applied for service credit and am waiting to find out the amount due. Can TSP funds be used to purchase federal service credit?

Answer: No- you can't directly take TSP funds while working and use them to fund your military service credit . You COULD take out a general TSP loan, but there really is no benefit to doing that, UNLESS you are trying to retire immediately and don't have any other choice. In that case, yes, you could take out the loan, but then you'll be hit with the taxable income if you retire before paying off the loan.

Under the rules for FERS employees, if you make your military service deposit within three years of starting federal employment, all you have to pay is the 1.3% of military pay, and no interest is due. If you wait until later, you'll have to pay the 1.3%, plus interest each year.

Most people who do the service credit do so by making a per-paycheck deduction. Just make sure you put in enough to pay down the principle. It has been known that some folks barely contribute enough and stretch it out for years, ending up paying more in interest than they would have in priniciple.

Here is a link to the OPM rules for Military FERS deposit credit:
Creditable Service

Make that deposit within the first three years of federal service, and no interest accrues. Good luck.

 

[Kimmy]

Thank you for your responses. By the way this not military service credit but refunded regular GS credit that I took years ago when went to work in corporate America and had no idea that I would ever work for the federal government again. I thought it worked like a roll-over where you can roll pretax dollars to another pretax dollar account. But I guess it does now work like that. Most of the money in my TSP is money rolled over from 401K and IRA accounts. Actually when I took the money out of the fed gov't I put it in a IRA. I'm still learning but I will get my service credit purchased. Thanks.

 

[James48843]

Ah- you are talking about a REDEPOSIT of FERS retirement contribution-

the answer there is--- before 2009, one could not make a redeposit for FERS service- if you took the money out- it was lost time forever. A change in 2009 allows you to now make a re-deposit for the service time, using form SF 3108, and you can either pay it in a lump sum, or set up an installment plan. You must pay the 1.3%, plus all the interest due since then, to receive FERS redeposit credit.

Here are the details of making a FERS redeposit:

http://www.opm.gov/retirement-servi...nefits-administration-letters/2011/11-103.pdf

You could take a TSP loan, or you can simply make an installment plan. But you cannot simply move TSP dollars to the FERS system- it's apples and oranges. Two different retirement things- you cannot mix them.

You must, however, pay the whole thing off before you retire in order to get credit.

 

[Kimmy]

Thank you for the information. I have submitted the SF3108 and it is being processed now. Soon I will find out the redeposit amount. That will give me another 3 years. Thanks again.