October 2009
HIGHLIGHTS
Thrift Savings Plan
New Law Authorizes Changes to the TSP
Back in June, the President signed a new law — the Thrift Savings Plan Enhancement Act of 2009
(P.L. 111-31, Division B, Title I) — which brings new benefits to many TSP participants and their
heirs. One of the changes required by this law has already been implemented. The others will
be put in place over the next few years. Read the descriptions below to learn about these new
features in order of their planned implementation.
•Immediate agency contributions. As soon as the law was signed, the waiting period for
Federal Employees’ Retirement System (FERS) employees to receive agency contributions was
eliminated. If you are a FERS employee, you should now be receiving Agency Automatic (1%)
Contributions — and, if you are also contributing your own money, Agency Matching Contributions
as well — regardless of when you were hired or rehired.
•Accounts for spouse beneficiaries. Beginning in early 2010, if you die and your spouse is
the beneficiary of your TSP account, your spouse will have the option of leaving the death
benefit payment in a TSP account in his or her own name. Currently, a spouse beneficiary
may only transfer a TSP death benefit payment to an Individual Retirement Account (IRA) or
eligible employer plan or receive a lump sum payment in cash.
•Automatic enrollment. Starting next spring, new Federal civilian employees will automatically
make payroll contributions of 3% to the TSP. Their agencies will send their contributions to
the TSP along with an additional 4% of their pay (Agency Automatic (1%) and 3% Matching
Contributions) each pay period, unless the employee opts out of contributing or elects to contribute
more or less. This will give new employees a chance to start saving early, receive agency
contributions (if FERS), and achieve potentially greater retirement savings.
•Roth feature. Down the pike, the TSP will begin offering a Roth feature. (This will not be a
Roth IRA, and you will not be able to transfer a Roth IRA into the Roth TSP). It will be the
equivalent of a private sector Roth 401(k), which is subject to different tax rules from a Roth
IRA and open to people of all income levels. Your contributions to the Roth TSP will be made
on an after-tax basis, and you will not have to pay Federal income tax on any money you
withdraw from it. (However, you will still have to pay an early withdrawal penalty if you don’t
meet the age requirement for withdrawing.)
The TSP estimates it will take about 2 years to implement this benefit. It will require substantial
modifications to agency and uniformed service human resources and payroll systems as
well as to the TSP’s own record keeping and accounting systems. The TSP will provide participants
with educational materials as the implementation date approaches.
The legislation also allows the TSP to offer a mutual fund window in the future. A mutual fund
window would allow participants to invest some of their TSP savings in mutual funds outside the
TSP. Expenses related to the mutual fund window would be borne solely by those participants
who use it. The TSP will further consider this option in cooperation with the unions and associations
on the Employee Thrift Advisory Council.
For more details about these new benefits as they evolve, watch this newsletter and the TSP website.
TSP website: ThriftLine: 1-TSP-YOU-FRST (1-877-968-3778) TDD: 1-TSP-THRIFT5
www.tsp.gov Outside the U.S. and Canada: 404-233-4400 (1-877-847-4385)
End-of-Year Reminders
•Be sure the TSP has your correct address so that you
will receive mailings of the annual letter from the
TSP’s Executive Director, your annual participant
statement (if you did not opt out of receiving a
paper copy), important TSP notices, and IRS Form
1099-R (if you received any distributions from the
TSP in 2009). If you are an active Federal employee
or member of the uniformed services, report any
address change to your agency or service. If you are
separated from service, report any address change
directly to the TSP.
•December 15 is the deadline for the TSP to receive
requests for annual changes in monthly payments.
This deadline applies only to participants who are
in monthly payment status. Eligible participants
will receive a notification in the near future.
•On the following Federal holidays, the Thrift Savings
Plan will be closed. Therefore, transactions
that would have been processed on each of these
days will be processed the night of the next business
day at the next day’s closing share prices.
October 12, 2009 — Columbus Day
November 11, 2009 — Veterans Day
November 26, 2009 — Thanksgiving Day
December 25, 2009 — Christmas Day
January 1, 2010 — New Year’s Day
January 18, 2010 — Martin Luther King, Jr. Day
