What is the Thrift Savings Plan?
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The Thrift Savings Plan (TSP) is a Federal Government-sponsored retirement savings and investment plan. Congress established the TSP in the Federal Employees' Retirement System Act of 1986. The purpose of the TSP is to provide retirement income.
On October 30, 2000, the Floyd D. Spence National Defense
Authorization Act for Fiscal Year 2001 (Public Law 106-398) was signed into law. One provision of the law extended participation in the TSP, which was originally only for Federal civilian employees, to members of the uniformed services.
The TSP is a defined contribution plan. The retirement income that you receive from your TSP account will depend on how much you have contributed to your account during your working years and the earnings on those contributions.
The TSP offers the same type of savings and tax benefits that many private corporations offer their employees under "401(k)" plans. TSP regulations are published in title 5 of the Code of Federal Regulations, Parts 1600 - 1690, and are periodically supplemented and amended in the Federal Register.
How does the TSP differ from the uniformed services retirement system?
In contrast to the TSP, the uniformed services retirement system is a defined benefit program. This means that the benefit you receive from the uniformed services retirement system (i.e., your retired pay) is based on your years of service and the rank you hold at the time of your retirement, rather than on the amount of your contributions and earnings, as is the case with the TSP.
In addition, unlike participation in the uniformed services retirement system, participation in the TSP is optional. To participate in the TSP, you must sign up with your service. You contribute to the TSP from your own pay; the amount you contribute and the earnings attributable to your contributions belong to you. They are yours to keep even if you do not serve the 20 or more years ordinarily necessary to receive uniformed services retired pay.
Who administers the TSP?
The Federal Retirement Thrift Investment Board administers the TSP and contracts with various private sector companies to provide record keeping services. Your employing agency also plays an important role in TSP administration.
The Board. The Federal Retirement Thrift Investment Board is an independent Government agency. The five presidentially appointed members of the Board and the Executive Director are required by law to manage the TSP prudently and solely in the interest of the participants and their beneficiaries.
Money in the TSP and earnings on that money cannot be used for any purpose other than providing benefits to participants and their beneficiaries and paying TSP administrative expenses.
The financial statements of the Thrift Savings Fund are required by law to be audited annually. (The Plan year is the calendar year.) You may obtain the audited financial statements from this Web site.
Your Service. While you are a member of the uniformed services, your service is your primary TSP contact. Your service will provide you with TSP forms and informational materials and answer your questions about the TSP. You submit the Election Form (TSP-U-1) to your service to enroll in the TSP. (Your service may use an electronic version of the Election Form, e.g., on MyPay. Ask your service about the availability of this method.) Your service's payroll office will report to the TSP record keeper the dollar amount of your contributions (and any loan payments, if you have taken a loan from your TSP account) each pay period.
You should compare the information on the leave and earnings statement that you receive each month with your TSP participant statements to ensure that your service provides the TSP record keeper with correct and up-to-date information about your contributions. As long as you are a member of the uniformed services, your service must also provide the record keeper with the personal information that is necessary to maintain your account - for example, your date of birth and your address. If you need to correct your TSP account information, including your address, contact your service TSP representative. Your service is responsible for correcting errors in your personal information and contributions including loan payments).
Record Keeping Services. The Board has contracted with a number of private sector companies to provide record keeping services for the TSP, which include maintaining the accounts of TSP participants, processing requests for benefits, and call center support.
The TSP processes contribution allocations, interfund transfers, loans, withdrawals and transfers of funds into the TSP from other plans, as well as participants' designations of beneficiaries. The TSP is also your primary contact after you separate from Federal service.
Click here for contact information for the various services provided by the TSP.
What are the major features of the TSP?
You may elect to contribute any percentage (1 to 100) of your basic pay. However, your annual dollar total cannot exceed the Internal Revenue Code limit, which is $15,000 for 2006. If you contribute to the TSP from your basic pay, you may also contribute from one to 100 percent of any incentive pay or special pay (including bonus pay) you receive, up to the limits established by the Internal Revenue Code.
The TSP offers the following:
- Immediate member contributions
- Before-tax savings and tax-deferred investment earnings
- Daily valuation of accounts
- Low administrative and investment expenses
- Transfers into the TSP from other eligible retirement plans or traditional
- IRAs and eligible employer plans
A choice of investment funds:
- Government Securities Investment (G) Fund
- Fixed Income Index Investment (F) Fund
- Common Stock Index Investment (C) Fund
- Small Capitalization Stock Index Investment (S) Fund
- International Stock Index Investment (I) Fund
- Lifecycle (L) Funds
- Ability to make contribution allocations daily
- Ability to make interfund transfers daily
- Loans from your own contributions and attributable earnings while you are in service
- Catch-up contributions for participants age 50 or older
- In-service withdrawals for financial hardship or after you reach age 59½
- Portable benefits and a choice of withdrawal options after you separate from service
- Ability to designate beneficiaries for your account balance
- Spouses' rights protection for loans and withdrawals and recognition of qualifying court orders
- A Web site with general account information, capability for requesting contribution allocations and interfund transfers, the option of initiating (and possibly completing) loan and withdrawal requests on-line, up-to-date TSP materials and information, on-line participant statements, and calculators to estimate account growth, loan payments, and annuity amounts, as well as an elective deferral calculator. (Separated employees can also update their address information on the Web.)
- An automated telephone service (the ThriftLine) for account information and certain transactions
How does the TSP fit into the total retirement picture for members of the uniformed services?
The TSP can provide you with a supplemental source of retirement income in addition to your uniformed services retired pay. Your contributions and earnings are yours to keep, even if you separate from the uniformed services before retirement. (Note: If you leave the uniformed services and enter the Federal civilian service, you will be able to continue contributing to the TSP; you can also combine your uniformed services account with your civilian account.) To find out more about uniformed services retirement benefits, contact your service.
What if I can't afford to contribute very much?
You can contribute as little as one percent of your basic pay each pay period. Even small savings add up over time. If you put in only $40 from your pay each month, here's the approximate amount you could have in your TSP account in 20 years.
$40 Monthly contributions = $9,600
Earnings (assuming 7% a year = $11,359
Your total in 20 years = $20,959
Can I withdraw my money while I am a member of the uniformed services?
The purpose of the TSP is to provide you with a source of income for your retirement. The TSP is not a savings account that can be withdrawn at any time. If you think you may need your money in the near future, or if you do not have other funds saved for emergencies, you will want to consider your other needs carefully before deciding how much to contribute to the TSP.
However, while you are still a member of the uniformed services, the TSP loan program can give you access to money that you have contributed to your account. In addition, participants who are age 59½ or older can make a one-time withdrawal from their TSP accounts while they are still in service. In-service withdrawals for reasons of financial hardship are also available. In-service withdrawals are restricted by law, and funds withdrawn are taxable and may be subject to early withdrawal penalties. Other conditions and restrictions apply. See In-service Withdrawals.