The IRS has announced a $500 increase in the elective deferral limit for 2018, allowing TSP participants to contribute up to $18,500. These inflation adjusted raises are required to be $500 increments, and usually come just after the Social Security Administration announces the annual COLA (2 percent, http://www.fedweek.com/fedweek/january-retirement-cola-set-2-percent/).

The elective deferral limit does not include the agency match that is received by FERS employees. If an employee’s salary was $100,000 a year and they contributed the full $18,500, their agency would add another $5,000 (5% of $100,000) and the total amount going into the TSP would be $23,500.

Most employees who can afford to contribute the maximum to the TSP choose to contribute a fixed dollar amount each pay period, rather than a percentage of their salary. With the new $18,500 elective deferral limit the bi-weekly contribution would be $712 in a 26 pay day year and $686 in a 27 pay day year.

There was no change in the amount allowed for a “catch-up” contribution for those 50 and over (it includes the year in which one turns 50); that amount remains at $6,000. If an employee making $100,000 a year were able to make the full catch-up contribution, he would be seeing $29,500 a year added to his TSP balance.

New Withdrawal Options Coming

There were no other changes announced for the TSP or other employer plans, but it is likely that we will see a major change in the way we can withdraw money from our TSP accounts. The House has passed legislation allowing significantly more flexibility in the withdrawal choices available to TSP participants. That bill appears likely to pass the Senate and get signed into law during this Congress.

The Thrift Board is considering other changes as well: 1) the composition of the I Fund; 2) the time between each of the L funds; and 3) allowing TSP participants to invest in outside mutual funds. None of these are imminent, and no one ever accused the Thrift Board of moving too quickly, but it’s nice to see some movement coming from the Board.

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